An Already Skeptical Market Grapples With Too Much Transparency
Trump is convinced that the short-term pain of tariffs will work, but the market has doubts about the positive impact of the policies and the method of negotiation.
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The stock market has been off to its worst start of a year since 2009, when the economy was in the grips of an ugly recession. 2009 turned out to be a major turning point that led to a strong uptrend, which didn’t end until Covid-19 hit in 2020.
The recession of 2008-09 is not a very good comparison for what is happening now since the economy is in substantially better shape, but it does illustrate how corrections can gain momentum and continue much longer than seems likely.
What the market is grappling with now is a high level of uncertainty about President Trump’s tariff policies as well as the economy in general. The two issues are interrelated, and there is growing concern that tariffs will not lead to the the golden economic age that Trump is promising.
Ironically, one of the primary problems is that Trump is offering too much transparency. Typical economic negotiations like those with Canada and Mexico would be taking place behind closed doors, but instead, we are seeing a steady barrage of headlines as each side makes its next move.
On Wednesday morning, steel and aluminum tariffs are starting to hit Europe, which is responding with tariffs of its own. Again, this is likely to lead to public negotiations that will create volatility and unsettle the market.
Aside from tariffs, the market is now dealing with the issue of where the economy is headed. Goldman Sachs cut its end-of-the-year target for the S&P 500 to 6200 from 6500 based on projections of reduced GDP growth and greater uncertainty.
The market will be watching CPI news very closely Wednesday morning. There are some concerns about stagflation, but a soft report will ease those fears and also give the Fed some clearance to cut interest rates more aggressively later this year.
Trump is convinced that his tariffs and policies will produce an economic boom, but the market is skeptical and struggling with the impact of tariffs. It will take a while before we have greater certainty, which means we will continue to experience elevated volatility and ongoing technical pressure.
I am watching for chart development in individual stocks. I want to see some support hold for longer than a day or two.
We have a positive start as we await the CPI report.
At the time of publication, Rev Shark had no positions in any securities mentioned.
