Investors hope April 2 could bring some tariff clarity and relief. That may not happen
Stocks have been in turmoil this year, as investors struggle to price in the full breadth and depth of President Donald Trump's policies that are shifting the lines of global trade. The S&P 500 was last more than 8% off its all-time high, after falling into correction territory earlier this year. The Nasdaq Composite is more than 13% off its recent peak.
A clear-enough blueprint from Trump when he takes to the Rose Garden on Wednesday afternoon to announce his plan for reciprocal tariffs could give investors some much-needed certainty. But few expect that will be the end of it.
'Personally, I don't believe that if you just get a framework announced, no matter what it is, that's enough for a relief rally,' said Gabriela Santos, chief market strategist for the Americas at J.P. Morgan Asset Management.
'I think you need a detailed framework, and you need there to be a certain amount of tariffs on a certain amount of countries for a certain amount of time for it to be able to be digested by the economy — and ultimately by the markets, which I think have only started to price this in,' Santos said.
There is hope of an April rebound for the stock market. The S&P 500 has done well in April when it's started the month below its 200-day moving average, according to Oppenheimer technical strategist Ari Wald. Typically, it averages a 2.5% advance for the month, and it's positive 73% of the time going back to 1950.
The worst-case scenario
But investors will need some key questions answered around trade policy, in addition to some reassurance that the economic picture is not as bad as feared, for the market to truly rebound from here.
Brett Ryan, senior U.S. economist at Deutsche Bank Securities, worries that a 'maximalist' approach to tariff policy from the Trump administration — meaning a tariff on all 15 countries the U.S. has a persistent trade deficit with — would bring the average tariff rate to over 16%, from 10.5%, where he said it's currently projected to go to. In 2024, the tariff money collected as a share of total imports equaled 2.5%, according to the Tax Foundation.
For investors, that would further ding the outlook for economic growth and inflation, and raise fears of a stagflation scenario taking hold. In that maximalist scenario, Ryan expects real GDP growth will take a 1 to 1.5 percentage point hit.
Fears of slower economic growth — sparked in part by tariffs — already have market observers cutting their year-end forecasts for the S&P 500. David Kostin, chief U.S. equity strategist at Goldman Sachs, lowered his 2025 target for a second time this year, to 5,700 from 6,200.
What's clear, at least, is that Wednesday could be the start, not the end, of a long road ahead.
Christopher Harvey, head of equity strategy at Wells Fargo Securities, said he remains constructive on equities. However, he worries the risks around what the White House calls 'liberation day' are 'not small' and could lead to a recession.
'We have no inside beat on how long these new tariffs will last. We simply believe that the depth and the breadth of tariffs, and the number of stakeholders involved, creates a significant number of permutations and combinations,' Harvey wrote in a note. 'Governments, which are generally not fast moving entities, may first determine whether they want to retaliate; even if they do not, we see a long road to the negotiation table.'
'We believe the process (even under the most optimistic scenario) will require weeks/months of discussions before official changes can even be considered,' Harvey wrote. 'The bottom line is we think investors and investors' portfolios need to get comfortable with uncertainty.'
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Reuters
11 minutes ago
- Reuters
Trump picks Heritage economist Antoni to lead US labor statistics agency
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Antoni last year wrote an opinion, opens new tab piece in the New York Post, stating "the Biden-Harris Labor Department seems to exist in the land of make-believe." That was after the BLS published data estimating a sharp downward revision to the level of employment from April 2023-through March 2024. The nomination of Antoni, who contributed to "Project 2025," the controversial conservative plan to overhaul the government, was met with reservations from economists. "The nominee will result in a surge in demand for private label data," said Joe Brusuelas, chief economist at RSM US. Groundwork Collaborative's head of policy and advocacy Alex Jacquez called Antoni a "sycophant," adding his selection was "a clear assault on independent analysis that will have far-reaching implications for the reliability of U.S. economic data." Antoni, who must be confirmed by the Senate, would take over an agency that has come under heightened scrutiny for the eroding quality of the data it produces. Trump added to growing concerns about the reliability of BLS and other federal government economic data when he fired Erika McEntarfer as BLS commissioner on August 1. Her dismissal came hours after the agency reported much weaker-than-expected job growth for July and issued an historically large revision to its employment figures for May and June. In announcing her firing, Trump accused McEntarfer - appointed to the role by former President Joe Biden - of manipulating the employment data for political purposes. There is no evidence of that being true. He promised he would replace her "with someone much more competent and qualified." Antoni, who holds a doctoral degree in economics, was previously an economist at the Texas Public Policy Foundation and has taught courses on labor economics, money and banking, according to the Heritage Foundation. He must now address the difficulties BLS has had with declining survey response rates and with data collection problems in other critical statistical series, such as for inflation. "He does have the necessary economic credentials, but that doesn't mean he understands how BLS puts together the data and how revisions are put together on a monthly basis," said Sung Won Sohn, finance and economics professor at Loyola Marymount University. "Some of the data that will be forthcoming will not be to President Trump's liking, it will be interesting how he would explain that and how the president would react to that." The nonfarm payrolls report provides a monthly snapshot of the U.S. job market, offering scores of figures including how many jobs were created, what the unemployment rate was, how many people joined or left the labor force and what workers earn per hour and how many hours they work in a week. Its headline estimates for job creation are revised twice after their initial release to account for the submission of additional survey responses from employers and updates to the seasonal factors that underlie the statistics. They are also subject to an annual benchmark revision process. The monthly Consumer Price Index and Producer Price Index together historically have provided a comprehensive picture of U.S. inflation, including hundreds of data points depicting the changes in cost for everything from eggs to auto insurance, figures relied upon heavily by policymakers like those at the Federal Reserve. CPI is used to set the annual cost-of-living-adjustment for retirees receiving Social Security payments. Years of underfunding of the BLS under both Republican and Democratic administrations and Trump White House's unprecedented campaign to reshape the government through deep spending cuts and mass layoffs of public workers have led to the suspension of data collection for portions of the CPI basket in some areas across the country. That has led to the BLS using imputations, opens new tab to fill in the missing information. The percentage of prices that are imputed rather than gathered has more than tripled this year to 35%, opens new tab. "I can't help but worry some deadlines are going to be missed and undetected biases or other errors are going to start creeping into some of these reports just because of the reduction in staff," Erica Groshen, who served as BLS commissioner from 2013 to 2017 during President Barack Obama's second term and the first months of Trump's first term.
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11 minutes ago
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The Independent
41 minutes ago
- The Independent
Trump nominates Bureau of Statistics critic to lead agency after previous head fired over bleak report
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