Stock-Market Investors Struggle with Tariff Uncertainty as Trade Deals Hold the Key
In a climate clouded by tariff uncertainty, U.S. stock-market investors find it increasingly difficult to cement positive momentum. As equities recently demonstrated a minor rally, sentiment remains cautious, heavily influenced by President Donald Trump’s sweeping tariffs enacted on April 2, 2025. Morgan Stanley’s Andrew Slimmon asserts that amidst these turbulent waters, speculating on company earnings is a “borderline waste of time.”
Tariff Uncertainty Overwhelms Economic Data
Investors are approaching upcoming economic reports with skepticism. With vital data on U.S. jobs, inflation, and gross domestic product (GDP) expected shortly, many analysts caution that this information will be backward-looking, providing little insight regarding the oncoming impact of tariffs.
Alexis Deladerrière, co-deputy chief investment officer at Goldman Sachs Asset Management, urges investors to diversify their portfolios, commenting, “We don’t want to take too much risk at the country level,” implying that large adjustments between U.S. equities and international stocks may not be prudent at this time. Global uncertainty surrounding tariff negotiations, especially between the U.S. and China, has left market participants in a holding pattern.
Market Performance Under Tariff Pressure
Since the announcement of “liberation day” tariffs on April 2, the U.S. stock market has significantly lagged behind global counterparts. The S&P 500 index, which measures large-cap U.S. stocks, fell by 2.6% during this timeframe, while the iShares MSCI ACWI ex U.S. ETF climbed 1.4%. Moreover, the Vanguard FTSE Europe ETF increased by 2.5%.
Good underlying prospects in European equities arise from the European Union’s plans to bolster defense spending along with Germany’s infrastructure investment initiatives. However, European markets are not entirely immune to the effects of U.S. tariffs, and it is uncertain if negotiations will alleviate some of those trade pressures.
A Shift Toward Neutral Investments
Market participants are on guard, with tariffs contributing to a shift in investment strategies. Phil Camporeale, a portfolio manager at J.P. Morgan Asset Management, moved his approach to be neutral on both stocks and bonds globally due to the overwhelming nature of the tariff situation. Transitioning from being overweight in U.S. equities earlier in 2025, Camporeale now views the shift in outlook as essential amidst the escalating uncertainties.
The Long Road Ahead for Trade Agreements
Industry experts anticipate that tariff negotiations will take considerable time to reach resolutions. Deladerrière emphasizes that as the discussions unfold on various fronts, investors may gain clarity, though this process could span months or years. Predicting that certain industries may face different tariffs, understanding how businesses will adapt remains challenging without established “new rules of the game.”
In the interim, focus should be placed on identifying high-quality companies that not only possess strong pricing power but also feature robust margins and stable cash flows.
Upcoming Economic Indicators
The investing community will be watching closely for employment data due on May 2 and inflation statistics on April 30. Despite forecasts indicating a soft economic landscape, outcomes in the coming week may not reflect the detrimental effects anticipated from ongoing tariff adjustments.
Deladerrière suggests that companies are currently hesitant in hiring and spending, shining a light on expected slowing growth within the U.S. economy. Since the stock market closed with a modest weekly gain, it is still down 1.5% for the month of April following the onset of tariffs.
Market Recovery Potential and Investment Strategies
Despite current fluctuations, Slimmon regards the steep decline in the S&P 500 as a potential buying opportunity. Following a significant dip of nearly 19% from the year’s height on February 19, he believes that investing post-drop may yield positive outcomes over the coming year.
As for high-yield corporate bonds, Camporeale appreciates their stability and decent yields amid market volatility, indicating that these investments appear attractive for the time being.
Ultimately, experts remain cautious about overall economic growth, anticipating less than 1% growth for the U.S. this year, while the S&P 500 may cap out at around 5,800 as ongoing discussions about tariff implications redefine market trajectories.
As uncertainty looms large within the stock market amidst tariff turbulence, seasoned investors are advised to keep a watchful eye on evolving trade dynamics, favoring quality and stability while maintaining diversified portfolio strategies.