Lutnick: US Markets to Thrive Long-Term Despite Trump Tariffs

In the face of President Donald Trump's aggressive tariff policies, Commerce Secretary Howard Lutnick remains steadfast in his belief that U.S. markets will perform "extremely well" in the long term. Despite the immediate selloff and market volatility, Lutnick's confidence is rooted in a combination of historical data, economic fundamentals, and strategic policy initiatives.



Historical Market Resilience

The S&P 500 has a proven track record of resilience, delivering an average annual return of over 10% since 1957. This includes periods of significant economic challenges, such as the stagflation of the 1970s, the dot-com bust of the early 2000s, and the financial crisis of 2008. Each downturn has been followed by a recovery, with the market entering its longest bull run in history after the 2008 crisis, rising 330% over 10 years from 2009 to 2020. This historical data supports Lutnick's optimism, as it demonstrates the market's ability to recover from downturns and continue delivering strong returns over the long term.

Economic Fundamentals

Lutnick's confidence is also bolstered by several key economic indicators and fundamentals. Accelerating earnings per share, improved productivity, and higher profit margins in the U.S. compared to non-US markets suggest that U.S. companies are well-positioned to weather short-term disruptions. Additionally, the cleaner balance sheets of U.S. firms, which have de-levered at a faster rate, provide a stronger financial foundation to withstand economic shocks.

Global Expansion and Consumer Sentiment

The global expansion of U.S. firms, with around 40% of their profits generated from overseas, helps mitigate the impact of tariffs on U.S. markets. Strong consumer sentiment and spending power in the U.S. further support economic growth despite external disruptions. Lutnick likely considers these factors when predicting the long-term resilience of U.S. markets.

Industrial and National Security

Lutnick emphasizes the importance of critical sectors for national security, such as steel, aluminum, copper, automobiles, semiconductors, pharmaceuticals, and lumber. The focus on domestic production and self-sufficiency in key industries suggests a long-term strategy to insulate the U.S. economy from external shocks.



Market Volatility and Consumer Sentiment

The recent focus on new tariff policies is a critical market factor, according to Eric Freedman, chief investment officer for U.S. Bank Asset Management. "There’s been a lot for the market to absorb with the on-and-off status of tariffs, their size, the countries affected and mechanisms by which tariffs will be enacted." Freedman says the pace of change has given companies and consumers a lot to take in over a short period of time. In addition, Trump’s policy shifts on the Russia-Ukraine war, temporarily pausing U.S. financial support for Ukraine, heightened geopolitical concerns. This too contributed to further investor uncertainty.

Conclusion

Despite the immediate impact of Trump's tariffs, Commerce Secretary Howard Lutnick's confidence in the long-term performance of U.S. markets is well-founded. Historical market data, strong economic fundamentals, and strategic policy initiatives all support the notion that the U.S. markets will remain resilient in the long term. While the short-term volatility may be challenging, the underlying strength of the U.S. economy and its ability to adapt to changing circumstances bode well for future growth.