Will the Market Shrug Off Tariff Worries Like It Did in April?
Tariff news provided a convenient excuse to sell an overbought market, but dip buyers are lurking and anxious to put cash to work.
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Market indications are mixed early Tuesday morning as investors contemplate renewed focus on trades and tariffs.
The market reacted poorly on Monday after President Trump sent letters to 14 countries outlining the potential for increased tariffs. Interest rates moved higher, the dollar strengthened, and equities had their first weak close in ten trading sessions.
The question on the mind of many market participants is whether this is a repeat of the pattern that occurred earlier this year after Trump announced “Liberation Day." The market initially sold off aggressively in April on the headlines of increased tariffs, but then recovered when deadlines were pushed back and the framework for potential deals was announced. The market eventually completely recovered the losses caused by tariff concerns and even more, although only a couple of deals were ever announced.
The bears and economic pessimists continue to believe that tariffs will ultimately be a significant negative that will drive inflation higher and slow economic growth. While they have been gloriously wrong so far, that hasn’t stopped the speculation that a wave of pain is on the way. So far, the economy has been extremely resilient, and there isn’t any data on the horizon that are likely to surprise investors right now.
The key thing that investors have to watch are technical conditions. The indexes hit new all-time highs last week, and the tariff news provided a very convenient excuse for profit-taking. It was a relatively mild pullback, but it was the first crack in the uptrend in quite a while. The issue now is whether the sellers will gain some traction as we await more tariff news and the start of earnings season next week.
The primary positive is that there are many investors who missed out on this powerful run, and they are sitting on the sidelines with cash they would like to deploy at lower prices. There should be some strong technical support. Dip buyers are very likely to feel confident, as there have not been any failed bounce attempts since the bottom in April.
There are not a lot of great technical setups currently, as many stocks are now overbought and need consolidation, but that can change very quickly if the market struggles for a few more days.
My plan is to monitor positions carefully and cut some exposure if charts deteriorate. I’ll also continue to dig for some new ideas with an eye on upcoming earnings as a catalyst.
At the time of publication, Rev Shark had no positions in any securities mentioned.
