Markets have 'stepped back from the brink' of tariff volatility

Yahoo

30-05-2025

Marta Norton, Empower chief investment strategist, joins Market Domination Overtime with Josh Lipton and Julie Hyman to discuss the US economy, the "Magnificent Seven," and how the markets have been responding to shifting tariff headlines.
To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.
Well, for more on the market action, we're joined now by Empower chief investment strategist, Marta Norton. Marta, it's good to see you. So, I think, Marta, we gotta start on the, on the bouncing ball of tariff headlines. We have a court step in, they block a wide swathe of Trump tariffs, market rallies, right? But now, throughout the day, we then saw them give some of that up. Now we're in appeals court temporarily pausing this decision to invalidate the levies. I think investors are trying, Marta, to make sense of this. How are you, as a strategist, trying to make sense of this and what it means for the market?
I love the analogy of a bouncing ball. That's absolutely what we saw today and really what we've seen since April 2nd. We, of course, saw these massive reciprocal tariffs go into effect, and then we've seen pauses, we've seen delays and everyone's kind of on pins and needles waiting for what the actuality of the trade deals look like. And I think we can get that sense from the market that we've stepped back from the brink, and we see the market recovery go alongside that. And now we're at a point where we're trying to ascertain where exactly does that tariff level fall out. And I think the reality is we look at today is there could be a longer tail and even determining what the rules of the ground are as we work through these appeals processes and the different functions that the Trump administration is relying upon to put the tariffs in place that it wants to see.
Hey Marta, it's Julie here. All of that said, it doesn't seem like there is a huge amount of fear or concern or worry built in about tariff outcomes at this point. What is your sort of, I mean, do you even have a base case, I guess, at this stage because things are still kind of up in the air?
Well, you have to acknowledge a wide range of outcomes when you have these kind of variables that are so hard to predict. Certainly, that's the case. And I would also acknowledge that the market doesn't show a lot of fear. I mean, if you take a look at the recovery that we've seen since the initial sell-off, we've essentially done a round trip. So most of the market now is back up to the more extreme valuations that we saw heading into April 2nd. And so you could argue that the market is really focusing on the positive range of outcomes and not really accounting for anything that could go wrong on the tariff front or really any other area in particular. So I guess as I take a look at the market today, I would argue that there's just not as much margin of safety as I would like to see in this environment.
Marta, I'm curious to get your take on the economy as well today. We got, you know, GDP data today, another look at Q1. I know, you know, it's old news, but another, you know, a negative print, personal spending revised lower, your take on the economy, Marta, and where we are and where you think we're headed.
Well, a few things here to call out. First of all, just that hard data narrative has remained largely positive. So to the point, yes, GDP is showing some softening and especially, you know, reflecting the import surge that we saw, but we are seeing inflation prove a little bit more stable than folks had anticipated. We're seeing the labor market continue to show signs of resilience, and of course, we're coming out of this very strong Q1 earning season. But I think the reality is that the trend, regardless of which one of those variables that you're looking at, the trend is largely to the downside here. So we have a nice buffer from where we're starting from on the economic side, on the earning side, but we do expect the uncertainty that we're in and the concerns around a more protectionist policy broadly to have an effect on the economy.
Obviously, we saw those strong numbers from Nvidia that helped buoy those shares, and there's been a lot of attention on the Magnificent Seven more broadly, maybe excluding Tesla for the moment, right? We have seen valuations on those stocks really come down, particularly for Nvidia itself. Is that an area where you think investors should be, you know, hiding out, perhaps, in this market?
Yeah, it's such an interesting contrast when you look at the start of the year. The market looked overvalued, and a lot of that overvaluation was concentrated in those MAG 7 names. In fact, they looked historically expensive. Not as expensive as they were in late 2021, but still very pricey. And then you roll the clock forward to today, and the market generally looks expensive, and yet the MAG 7 are more reasonably priced. And when you think about the case for the MAG 7, the fundamental appeal that they have, whether it's from, you know, the earnings, the profitability, the balance sheet robustness, the AI theme that they're tied to, that's a lot of appeal from a fundamental perspective, and the valuations now are more approachable. So if we're looking for where the silver lining is in today's market price action, or in this year's price action, I would say it's a decent time to be a MAG 7 investor.
Are you as excited, Marta, as opportunities overseas as some of the other strategists we have on the show?
Well, certainly the valuation argument has favored markets overseas and continues to favor market overseas. I think the one consideration that I have there is just kind of where growth prospects stand overseas relative to the US. I think that the US has borne the brunt of the trade war, and I think at some point, there will be some pain borne by markets overseas. I also think that when you get excited about the AI narrative, you can get excited for opportunities in China certainly, and in the US, but it's harder to get excited about an AI narrative for Europe broadly. So I think that the valuation argument means that it makes some sense to lean overseas, but I think I would put a cap on that exposure.
Marta, always great to see and to have you on the show. Thank you.
My pleasure.