As April 2 approaches, the trends in the US stock market have shown some fluctuations, especially against the backdrop of uncertainty related to Trump's tariff policies. Although the major stock indices experienced a pullback, the market has not shown indications of a significant economic downturn. The S&P 500 Index has fallen about 8% from the record high in February, but it has rebounded over the past two trading days, continuing its previous upward trend from recent lows.
Investors remain relatively optimistic, mainly due to several factors: first, investors believe that Trump will not take extreme tariff measures that could negatively affect economic growth. Secondly, unless there are clearer signs of an economic downturn, the market is reluctant to bet on recession risks. Finally, as more details of the tariff policies become clear, market concerns and uncertainties have been reduced.
However, despite the optimistic market sentiment, top Wall Street investment banks still express concerns. Market experts point out that even if the Trump administration gradually clarifies the tariff policies, investors still struggle to grasp the true intentions behind these policies. Some analysts think that Trump’s team might use tariff uncertainty as a negotiation lever, which could have a significant impact on the market.
Opinions on the specific impact of tariffs vary among analysts and economists. Goldman Sachs analysts predict that the effective US tariff rate could rise by 15 percentage points this year, imposing a tax-like burden on consumers and potentially leading to a drop in economic growth of over 1%. The bank has raised the probability of a recession in the next 12 months to 35%, significantly higher than the previous forecast of 20%.
Morgan Stanley also indicates that the April 2 tariff announcement may not provide a clear directional signal to the market, and emphasized two key issues: firstly, whether the specific contents of the tariff policies can be clarified; and secondly, whether the increase in tariffs would further exacerbate the risk of an economic downturn.
Trump’s tariff policy remains the greatest uncertainty factor in the market. Investors are still unclear whether Trump genuinely aims to increase government revenue through tariffs or is merely using them as a tool for negotiating with other countries. If tariffs are intended to drive manufacturing back to the US, they may be here to stay for the long term. But if the goal is to press other countries into concessions, tariffs could be temporary.
Market uncertainty is also reflected in economic data. Although surveys show a decline in consumer and business confidence, "hard data" reveals a moderate decrease in actual spending, which has slightly buoyed market sentiment. The latest data shows that consumer spending increased by 0.4% in February, higher than the 0.3% decrease in January. Additionally, employment growth in February remained robust, and the unemployment rate stayed low, highlighting the resilience of the economy.
The performance of the credit bond market also indicates minimal investor concern over an economic recession. Although there has been an increase in the risk premium for low-rated corporate bonds, it remains below last year's peak, suggesting that the market does not expect a significant rise in default risk. Vanguard’s Colleen Cunniffe notes that the stability in the credit bond market reflects the current resilience of economic fundamentals, and while low-income groups face some pressure, overall consumer economic conditions are stable.
Overall, despite Trump's tariff policy remaining a focal point of market attention and ongoing uncertainty, economic data shows some resilience. Investors remain cautiously optimistic, hoping for more clear policy signals in the coming days.
