Don't Expect Trump to Roll Back Tariffs Anytime Soon, At Least Not Until We Enter A Bear Market
1min read Due to President Trump's erratic use of tariffs as a tool, the U.S. stock market has been experiencing a sustained downturn recently. However, analysts warn that unless the market falls to a certain extent, such as entering a bear market, Trump is unlikely to adjust his tariff policies.
The U.S. stock market had shown strong performance over the past two years, and investors had initially hoped that the bull market would continue upon Trump's return to the White House. They believed that Trump's promises of deregulation and tax cuts would benefit the economy, and the stock market had indeed been buoyed by these expectations. However, with the implementation of Trump's tariff policies, the stock market has largely erased all the gains made since the U.S. election.
As of Wednesday's close, the S&P 500 index has fallen by 0.66% year-to-date, while the Nasdaq has plummeted by 3.93%. Only the Dow Jones Industrial Average has managed to maintain a gain, rising by 1.09% year-to-date.
BCA Research has indicated that unless there is a risk of the U.S. stock market entering a bear market, Trump is unlikely to make concessions solely for the benefit of investors.
The research firm stated that this means the stock market may need to fall by another 15% before Trump changes his policies. This would represent a 20% decline from the peak reached in mid-February, officially entering technical bear market territory.
Matt Gertken, Chief Geopolitical Strategist at BCA Research, noted that Trump's tolerance for market volatility sends a signal to trade partners that he is resolute on the issue of tariffs.
Trump might be willing to destroy his party in pursuit of his historical legacy and geopolitical visions, but at least prior to the midterm election, we would bet that Trump will start to make trade concessions when the S&P 500 is down by around 15%. That can happen very quickly, Gertken wrote in the report.
Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Management, also believes that there is room for further selling in the stock market. He pointed out that Trump emphasized his tariff policies during his speech to Congress on Tuesday.
We think it's too early to go bargain shopping in some of the beaten down areas, such as technology, Landsberg said. We don't think the market has found a bottom yet. Both stock and bond market volatility has spiked up a bit and we think investors would be well suited being patient here and not overreacting to headlines.