Trump Can Unlock V-Shaped Market Rebound With This Tariff Decision
As the president prepares to announced anticipated tariffs, he has the chance to undo a lot of the damage to U.S. stocks.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
For the third day in a row, Wednesday morning started gloomy and negative. The market bounced back nicely on Monday and Tuesday, but with the Trump tariff announcement coming around market close, there may be some hesitancy to add more risk.
The great difficulty for the market regarding tariffs is that there will still be tremendous uncertainty. We don't know what the response will be for other countries, and we don't know what the economic impact will be. In many ways, this is just an early stage of negotiations. Many surprises lie ahead.
Let's look at some of the different views about the impact of the tariff news.
Bullish View
Fundstrate is often viewed as a perma-bull, so it isn't surprising that they predict a V-shaped rebound if tariffs are targeted rather than just a flat rate across the board. The argument is that the markets have overreacted, and clarity should spark a rally.
Treasury Secretary Scott Bessent also has a bullish spin. He views the tariffs as setting a cap from which they can be negotiated lower. We will know the worst-case scenario, which can be priced into the market with the potential for good news as negotiations proceed.
Bearish View
Yardini Research calls tariffs a "wrecking ball," which increases stagflation risk to 45%. The concern is that tariffs will trigger higher inflation, recession, and supply chain disruptions.
Goldman Sachs believes tariffs increase U.S. recession odds to 35% due to GDP growth pressure from weaker investment, higher costs and global retaliation.
LPL Financial Sees increased stagflation risk, corporate earnings pressure and rising market volatility.
Wedbush calls auto tariffs a "hurricane-like headwind" that will cause a spike in prices and squeeze profits.
Neutral View
The neutral view is that the panic is overblown, and much of the bad news is already discounted. The reaction will depend on how the tariffs are structured, but the market is already making adjustments, and there may be some beneficial outcomes to offset the negative fallout.
Market breadth is improving on Wednesday but still negative. Small caps are leading, with the Russell 2000 IWM ranking at 0.3%. After a bloodbath in the last two days, biotechnology IBB is bouncing with a gain of 0.9%.
I started a new position in the group with Ocular OCUL. OCUL is developing a treatment for wet AMD that is viewed as "paradigm changing." On March 26, analysts at Raymond James added it to the Analyst's Current Favorite List.
I'm also bottom-fishing some Mereo BioPharma MREO and added some Humaycte HUMA. Huma now has a secondary offering out of the way and will announce initial sales when it reports first-quarter earnings. The poor biotech action drove it down even further, and now it looks fully washed out to me.
Hopefully, once this tariff news is out of the way, we can spend more time on stock picking rather than dancing around to macro matter
At the time of publication, DePorre was long OCUL, MREO and HUMA.
