The tariffs announced by President Donald Trump have set off one of the most volatile trading periods in Wall Street history. This has created an uncertain outlook for investors. Analysts report that tariffs remain the primary mover of stock prices.
This places both market strategists and everyday investors in a challenging position. They must anticipate Trump’s next decision and its potential impacts. Analysts caution about potential market drops.
However, they advise investors to hold onto their shares if possible. Markets typically rise over the long term. Ed Yardeni is the president of market advisory firm Yardeni Research.
He is also the former chief investment strategist at Deutsche Bank’s U.S. equities division. Yardeni said, “The Trump administration’s policy swerves leave the markets kind of baffled, without investors having a clear idea of whether they should hold or fold when it comes to their stock portfolios.”
Callie Cox is the chief market strategist at Ritholtz Wealth Management. She advised investors this week, “Trying to predict policy – or markets’ next move – is a fool’s errand.”
Following Trump’s tariff announcement on April 2, the S&P 500 and Nasdaq experienced their biggest one-day losses since the pandemic.
However, when Trump paused some tariffs a week later, the indexes rebounded significantly. Despite these temporary recoveries, markets remain unstable. The Dow Jones Industrial Average has dropped about 4%.
The S&P 500 and Nasdaq have each fallen roughly 5%. The instability has also affected bond yields and the U.S. dollar. These typically serve as safe-haven investments during times of instability.
“It’s a wild time,” said Mike Loukas, CEO of TrueMark Investments. He noted that market volatility is now heavily influenced by White House policies and announcements.
Tariff impact shakes Wall Street confidence
This is rather than traditional economic data or corporate earnings. Federal Reserve Chair Jerome Powell has indicated that tariffs are expected to increase inflation and slow economic growth. Powell noted that the recent stock volatility is a result of significant policy changes from the White House.
Despite the market turmoil, some economic indicators remain positive. The unemployment rate is at a historically low level. Hiring exceeded expectations last month.
Inflation also cooled in March compared to its peak in 2022. However, the positive data predates the April 2 tariffs announcement. This month, consumer sentiment dropped to its lowest level since the Great Recession.
Several Wall Street firms and prominent investors have raised their odds of the U.S. experiencing a recession within the next year. The Trump administration recently paused reciprocal tariffs on most countries for 90 days. They plan to pursue trade agreements with about 75 countries during this period.
The ongoing trade disputes between the U.S. and China continue to have significant implications for many U.S. firms. China is the world’s second largest economy after the U.S.
San Diego-based LPL Financial suspended its estimate of a year-end target level for the S&P 500. They cited uncertainty surrounding tariff rates and their impact on earnings.
While recognizing the continued uncertainty, analysts advise investors to maintain their stock holdings if viewed as long-term investments. Loukas of TrueMark Investments views Trump’s tariffs as a negotiation tactic for better trade agreements. He sees recent volatility as a short-term fluctuation.
However, he cautioned that if the strategy fails, it could significantly impact the economic outlook. “You’re basically taking a bet on the U.S. economy and on American companies,” Yardeni said. “One of the things I’ve learned in 45 years of this business: It’s amazing how the economy and stock market do over time, despite Washington.”
Image Credits: Photo by Aditya Vyas on Unsplash
