A Market 'Held Hostage' by Tariffs Nervously Awaits First Major Trade Deal
Here's the biggest risk now as we move into the heart of first-quarter earnings season.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
The market sank on Wednesday as the trade war with China escalated over Nvidia NVDA chips, Fed Chair Powell made some not-so-dovish comments, and there was no news on trade deal progress.
There is a slight rebound on Thursday morning after President Trump commented that there is "big progress" being made in Japan tariff talks. However, that doesn’t mean a deal is coming soon. A second round of talks is set for later this month.
The bullish hope is that a parade of trade deals will be announced, which will increase pressure on China to negotiate. If trade deals can be made, then the risk of high tariffs that cause inflation and reduce growth can be avoided. Economic forecasts will improve nicely if major trade deals are announced.
Unfortunately, even if the trade situation is improved, the economy is already facing a slowdown. The pieces were put in place during the Biden administration for the economic cycle to turn down, and the tariff drama has helped to accelerate the process.
Next week, we move into the meat of first-quarter earnings season and will start to hear from major technology stocks that will have insight into both the impact of tariffs and the health of the economy. So far, the primary reports have come from the financial sector. Those have been OK, but there aren’t any stocks seeing strong positive responses to their earnings reports. That is partly due to market conditions and partly due to the lack of compelling forward guidance.
Currently, the market is held hostage by tariff news. The biggest risk is that trade talks with countries such as Japan, South Korea, and the U.K. drag out for weeks or even months. There were some promising signs in China relations, but no talks have taken place yet, and none have been scheduled.
Technically, the market is reflecting this uncertainty and nervousness. Even after the drop on Wednesday, there is no immediate danger of a retest of last week’s lows. The historic rally on the news of the delay on tariffs has provided some underlying support.
The long Easter weekend is coming up, and there is unlikely to be any major tariff news progress before the break. That may push some investors to reduce risk exposure in the case of negative developments over the weekend.
My game plan is to continue to cultivate active patience and watch for technical development in stocks on my shopping lists.
At the time of publication, Rev Shark had no positions in any securities mentioned.
