Trade tensions resurface as Trump proposes fresh tariff threats
Stocks Decline after Fresh Tariff Threats from President Trump
Stocks experienced a steep fall on Friday, following President Donald Trump's announcement of potential tariff increases on Apple products and the European Union. This development has reignited concerns about trade tensions that had temporarily eased over the past month.
President Trump took to Truth Social to announce a proposed 25% tariff on all iPhones manufactured outside the U.S., and later hinted at a 50% tariff on the EU, effective June 1, 2025. These announcements served as a stark reminder of the President's continued enthusiasm for using tariffs as a foreign and economic policy tool.
The unpredictable nature of U.S. policy and its reliance on the President's whims has caused fresh uncertainty in the market. This uncertainty had been reduced in the past month due to optimism that tariffs may settle below their initial levels, which had caused a significant dip in stocks in early April.
Eric Teal, Chief Investment Officer for Comerica Wealth Management, viewed the EU tariff threat as a "negotiating thesis" to secure individual or regional deals. Despite this, he expressed faith in companies' ability to weather temporary higher import prices.
Despite Friday's Setback, Analysts Remain Optimistic
Despite the temporary setback, many analysts remain positive about the stock market's ability to withstand tariff-related volatility. According to John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management, the market's fundamentals paint a picture of a "very much intact bull market," driven by factors such as the Fed's success in tempering inflation, solid corporate earnings growth, and a stable job market.
Mark Haefele, Chief Investment Officer of Global Wealth Management at UBS, expects the S&P 500 to end the year at 6,000, about 4% above its level on Friday, and stand at 6,400 next June. Haefele notes that despite the Neutral view, this outlook is not bearish and does not suggest selling equities.
Related Context:
The potential for higher tariffs and economic uncertainty is causing concern for retailers like Target, which have reported weaker sales due to consumer uncertainty over tariffs. This has led to concerns about consumer spending and economic growth. Inflation and recession risks are also factors influencing market performance. Consumers expect significant price increases over the next year, which could further impact economic stability.
However, Morgan Stanley suggests that 2025 may be a "pause" year for equities, with the S&P 500 possibly posting single-digit gains. This outlook is consistent with the expected behavior of a bull market in its third year. Morningstar advises investors to adopt a market-weight stance, focusing on value and core stocks, as the market is currently trading at an 8% discount to fair value.
In conclusion, while the stock market faces challenges from tariffs and economic uncertainty, there are signs that the bull market may not be over yet, and investors are advised to be cautious but not to abandon equities entirely.
- The proposed tariffs on Apple products and the European Union, announced by President Trump, have raised concerns about the impact on businesses, such as retailers like Target, due to potential weakening of consumer spending and economic growth.
- John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management, believes that despite the tariff-related volatility, the stock market's fundamentals show a "very much intact bull market," driven by factors like the Fed's inflation control, strong corporate earnings growth, and a steady job market.
- Morgan Stanley's outlook for 2025 suggests that it might be a year of single-digit gains for the S&P 500, aligning with the expected behavior of a bull market in its third year. This advice may encourage investors to maintain a market-weight stance, focusing on value and core stocks, as the market is currently trading at an 8% discount to fair value.
- In the long run, the ongoing developments in tariff policy and legislation could influence initial coin offerings (ICO) and broader financial investments, as economic stability and the health of the stock market are key factors in attracting investors.
