VIDEO: Trump’s April Tariffs — Will He or Won’t He?
Gaming out what could happen between tariffs and trade deals.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
In today’s Daily Rundown video, Chris Versace explains why tariff-related developments and headlines will remain the driver of the stock market over the next week.
Chris discusses how Trump’s mixed messages may be part of his negotiating strategy, and why we could see him announce trade deals as well as more modest tariffs come April 2. However, if that’s not what Trump delivers, cautious June-quarter guidance seems more likely.
Transcript
CHRIS VERSACE: Hey, everyone. Chris Versace. February 25th, Tuesday. We're coming off a nice pop in the market yesterday. Stocks looking to continue that move higher with the S&P 500 putting itself even further past its 200-day moving average. Yesterday afternoon on Alert, we gamed out what could happen with you if the market successfully moves past that technical level. And as we will continue to keep tabs on it.
We will also be mindful that the market measured by the S&P 500 faces, as we would say, some stiff resistance some 3%, 3% higher with the close band of its 50 and 100-day moving averages. Now, I did want to talk about some other things with you that we'll be paying close attention to in the very near term, one of them not so surprising. That's the late development yesterday that Atlanta Fed President Raphael Bostic shared that he just sees now one rate cut this year.
As you know, that compares to the Fed's most recent set of economic projections out last week that the overall central bank and Federal Open Market Committee telegraphed two potential rate cuts for this year. Now, you know we shared our skepticism with you. And candidly, we are not surprised by Bostic's change, especially after what we saw in the Flash March PMI report that was out yesterday. And we, of course, broke those comments down to you.
What did they show on the inflation front? Yeah, higher input costs and higher output costs. So in other words inflation really not cooperating when it comes to the Fed's 2% target. So when Bostic had to say that he moved, direct quote, moved to one mainly because I think we're going to see inflation be very bumpy and not move dramatically and in a clear way to the 2% target, we're not surprised. But here's the thing.
Bostic also added that tariff increases may hinder the central bank's efforts to lower inflation. No real surprise. And we've been talking about this, as have others. And really, that comment from Bostic really brings us to what I wanted to chat with you today about tariffs. You know that they are one of President Trump's self-confessed favorite words. And we have seen some movement on them this week with Trump indicating that reciprocal tariffs may not be as bad as feared yesterday.
Yes, he did vow to impose, quote, "substantial tariffs on the US' trading partners," but he did suggest that he's likely to give a lot of countries breaks. It was that combination again that suggests that tariffs may not be as bad as feared that led the market decline yesterday. And now today, we're starting to see that there may be a two-step approach to what gets unveiled next week. And what we have here is the market is really trying to make heads or tails of what we could see.
But it increasingly looks like that what we feared several weeks ago, what we get may not be as severe. Also, leading to that line of thinking is that ahead of the April 2 "Liberation Day," European union trade officials are meeting with the Trump administration next Tuesday, as are representatives from India's government. Most likely, there's going to be conversations about tariffs and exemptions.
So if we game it out, would it be like Trump to announce trade deal wins and a smaller set of tariffs touting it all as a collective win? Yeah. I think so. Let's remember, the president fancies himself as a great deal maker, so it's certainly possible. And as evidenced in his book, The Art of the Deal, the president believes that being bold, assertive, sometimes unpredictable, keeps opponents off balance and gives him the upper hand in negotiating. Sure sounds like what we're seeing here.
And at the same time, let's remember that Trump downplayed the stock market's February slide and the potential impact of tariffs on the economy, calling it a "period of transition." Let's remember that historically, he's used the economy and the stock market as a barometer of his presidential performance. So do I think he wants to totally torpedo both? No, I don't. So if we happen to get scaled back tariffs, but some also trade deal wins announced, if that's the outcome we get we could see the market's relief rally continue.
However, as we game it out, if that isn't the outcome, the impact of tariffs that are put in place and countries on the receiving end likely to respond in kind, well, that increases the odds that companies will serve up June quarter guidance that disappoints the market in the coming weeks. We've talked about it. That's really the focal point that we're watching for the market June guidance.
If that happens and it disappoints, well, that means that we are going to see some pressure on current consensus EPS expectations for the S&P 500 likely rekindle valuation questions. And we could very well see the next few weeks turn into a bumpy patch in the market, similar to what we saw in September and October of last year. Remember, in September, the market sold off after rebounding from its late July, early August lows.
We saw the same thing in October after the market recovered in September. So we're going to have to be mindful of all this as we march forward. It also means that we're going to have to pay really close attention to what happens out of the White House leading up to April 2. Odds are the market's going to be a little bumpy. It's going to react to the most recent headlines. But what's going to matter is what's announced right before April 2 or on April 2.
So we'll continue to follow those developments, sharing our insights with you, and positioning, or if need be, repositioning the portfolio as needed. So it's going to be very important over the next couple of days as we try to have a calm, cool, collected head that you be sure to digest our emails, our alerts. And if we make any moves with the portfolio, we, of course, want you right there with us. We've got a lot more coming up today. We'll see you soon.
