Wall Street is ready for Trump's tariff announcement; the fog of uncertainty continues to envelop Wall Street

The scheduled announcement of U.S. President Donald Trump on April 2, 2019 could remove the fog of uncertainty that has engulfed financial markets in this year. However, few investors expect definitive guidance.

Investors were optimistic about the pro-growth policies of Trump's government in 2025, but since his inauguration, the stock market has plummeted. Wall Street was thrown into turmoil by headlines about tariffs, which caused the S&P to fall as much as 10 percent earlier this month.

The benchmark index will likely finish the first quarter with a decline of about 5%. This is its largest drop for the first three-month period since 2020.

Mark Malek is Chief Investment Officer of Siebert Financial. He said: "I am an eternal bull but I believe that there are more downsides than upsides between now and the end of next week and certainly at the start earnings season."

The benchmark index fell about 2% Friday, after data revealed that U.S. consumers spent more in February despite rising prices of goods and services. The market's slide shows how investors are sensitive to any indication that Trump's trade protectionist agenda may reignite inflation.

The announcement of tariffs on April 2 should reveal the countries and sectors that Trump's administration is targeting as it attempts to reduce a global goods trade surplus of $1.2 trillion.

Stock prices are expected to be volatile, and will fluctuate wildly depending on a number of factors, including the amount and duration of tariffs, which sectors and countries they will target, and any retaliatory actions from trading partners.

Michael Arone is the chief investment strategist at State Street Global Advisors.

Arone stated that there is a possibility of more volatility after April 2nd.

The threat of retaliation was made by governments in Ottawa and Paris on Thursday after Trump announced a 25% tariff for imported vehicles. This slashed auto stocks, testing the already strained relations with allies.

Angelo Kourkafas is a senior investment strategist with Edward Jones. He said that the announcement on April 2 will likely not be a "one-and-done" event.

Kourkafas stated that "it is an important landmark, but it does not completely remove all of the uncertainty which could still exist."

All Spinach and No Candy

Matthew Aks is a senior strategist with Evercore ISI. He said that the market's reaction on April 2, "will heavily depend" on future tariffs and sectoral tariffs. It will also depend on how quickly other countries can retaliate against reciprocal tariffs.

He said that if other countries retaliated, it could create an escalatory loop that would dampen any sense of relief.

Barclays strategists lowered their target price of S&P500 for 2025 to 5,900, from 6,600. They did this because they expect earnings to be hit by tariffs, which will cause a slowdown in U.S. economic activity, but not a recession.

The bank reduced its estimate of 2025 S&P500 EPS to $262, from $271. This implies a growth that is slightly below trend, as a result of tariffs. Discretionary stocks are among the most susceptible.

UBS Global Wealth Management lowered its S&P500 2025 forecast to $6,400 from 6,600. It also lowered the 2025 S&P500 EPS forecast to $265 by $5.

There are also upside risks. If the Trump administration's proposed tariffs are not as bad as the market fears, the recent stock drop could be a buying opportunity.

Jamie Cox, Managing Partner of Harris Financial Group, said that he did not expect anything to happen that would shock the market on the downside. Jamie Cox would see any new bout of weakness in the market as an opportunity to buy.

Some people said that the deadline for tariffs could allow Trump to switch to market-friendly policies such as tax cuts.

Robert Pavlik is a senior portfolio manager with Dakota Wealth. He said, "I believe they will start to shift gears and move away from tariffs."

"That won't disappear completely, but the focus will be on tax issues." "That's what I hope for."

This could lead to a resurgence in the appetite of investors for risky assets.

Arone, from State Street, said: "It has been all spinach so far and no candy. But I think candy will likely come later in the season."

During Trump's initial term, the S&P 500 lost 18% of its value between January and December 2018, as a U.S. - China trade war intensified. As trade war fears eased, the index recovered all of its lost ground in about three months.

Investors worry, however, that a prolonged back and forth on tariffs increases the chances of lasting damage to U.S. economic growth. Investors worried about tariffs and a possible recession, which could lead to a drop in consumer confidence.

Malek, a Siebert employee, said: "I've never seen a confidence movement like this without a negative impact somewhere." John Canavan is the lead analyst at Oxford Economics. He said that recent stock market nervousness was largely due to fears of tariffs causing a significant economic slowdown. Canavan believes that some recent weakness may spill over into the second quarter.

Investors have been discouraged from buying stocks at a discount after Wall Street's decline in the last quarter due to uncertainty over tariffs.

Arone, from State Street, said that a greater level of clarity would allow the markets to rise.

He said, "I'm still sceptical that we will achieve that clarity... but we'll see."

(source: Reuters)