TIMOTHY A. CLARY / AFP by Getty Images
Takeaways
- Stocks fell after President Trump announced sweeping duties on nearly all U.S. imported goods, a move that economists warn may stoke inflation or stunt economic growth.
- Analysts expect tariff uncertainty to last as affected countries negotiate with Trump’s administration or enact tariff retaliation.
- Analysts warn investors against buying the current drop, but many say they should take a long-term view and continue investing in companies with solid fundamentals.
Stocks plunged after President Trump announced steep and far-reaching new tariffs, which economists warn will increase prices and slow down economic growth.
Following the late-Wednesday announcement of the new trade measures, the S&P 500 tumbled 10.5% across Thursday and Friday, the index’s worst 2-day stretch since March 2020 and its third-worst since the turn of the century.
Since Trump returned to the White House, in January, uncertainty about the size and scope tariffs has been a factor on the stock market. Investors had been hoping that this week’s tariff announcement—dubbed “Liberation Day” by Trump—would finally offer businesses and investors the clarity they’ve been looking for.
Trump’s “reciprocal tariffs” instead perplexed and confused economists, and heightened confusion on Wall Street. The tariff rates announced were higher than expected by most observers.
Wedbush analysts wrote on Thursday that they had to assume the rate was just a starting point for a new negotiation. Bernard Yaros, lead U.S. Economist at Oxford Economics agreed, saying that the staggered tariff deadlines—April 5 for a 10% universal tariff and April 9 for country-specific tariffs—suggested there was “some room for countries to negotiate.”
The stock market will continue to be impacted by tariff uncertainty as countries negotiate with Trump’s administration or retaliate, as China did Friday, with their own retaliatory duties.
Chris Zaccarelli is Chief Investment Officer of Northlight Asset Management. He says that risk-off positioning in the face so much uncertainty is the prudent thing to do. He notes that what lies ahead—the White House’s deregulation push, tax cut extensions, tariff rates negotiated lower—is likely to improve investor sentiment. “It will take some time for business and investment confidence to recover.”
“Stocks should stabilize once negotiations start to bear fruit and take rates down, assuming it's clear to markets that no meaningful tariff rates will be increased further because of retaliation,” says Jeff Buchbinder, Chief Equity Strategist for LPL Financial.
Should You Buy Dip?
Most analysts agree on the adage that says: Time in market beats timing market.
Simeon Hyman, ProShares Global Investment Strategy, says that investors should focus on their long-term objectives. “Pullbacks are natural after years of extended gains, and in hindsight, often represent a buying opportunity—particularly in high-quality companies with stable earnings.”
Shawn Tuteja, head of custom basket and ETF volatility trading at Goldman Sachs Global Banking & Markets suggests using relief rallies to trim market exposure, “and then on dips, look to scale into companies that you can believe in the fundamental story and hold long-term.”
Some, however, warn against buying the dip yet. Adam Turnquist, LPL Financial’s Chief Technical Strategist, notes that corrections tend to trough when fewer than 10% of S&P 500 stocks are trading above their 20-day moving average; as of Thursday’s close, about 30% of the index was still above that threshold.
He also notes that the lack of institutional demand during Thursday’s stock sell-off suggested that stocks would continue to fall, which they did Friday. “Overall the technical evidence continues pointing to caution in buying this dip.”
