U.S. Stock Market Faces Growth Risks Despite Tariff Rollback

The recent rebound in the U.S. stock market may be facing risks, despite the White House's apparent backtracking on the large-scale "liberation day" tariff plan announced on April 2. The market has already priced in the expectation of a reduction in tariff intensity, but the actual economic growth remains constrained by higher trade barriers. This suggests that the Standard & Poor's 500 Index may struggle to break through the 5100-5500 point oscillation range.

Tom Essaye, the founder of Sevens Report Research, noted in a report on Monday that the Trump administration has significantly weakened the April 2 tariff announcement, including delays in implementation and exemptions for key import categories. For instance, categories such as semiconductors, electronics, pharmaceuticals, and automobiles have been granted tariff exemptions.

While the market has recovered from the initial drop following the "liberation day" announcement, the absence of expected negative outcomes does not equate to positive news. Although the Standard & Poor's 500 Index has risen for nine consecutive days, marking the longest streak since November 2004, it has still declined by 3.9% year-to-date.

Investors are concerned that retaliatory tariffs could slow down the U.S. economy and drive up consumer prices. They are closely monitoring the progress of negotiations between the White House and its trading partners. Essaye warned that when the trade agreement is officially announced, the market could experience a "sell the fact" reaction. Currently, the White House has paused the implementation of the April 2 retaliatory tariffs and is negotiating with trading partners. Although signs of easing trade tensions have boosted market sentiment, "new tariffs remain significantly higher than January levels, posing headwinds to growth."

Essaye emphasized that while current economic data is stable, the actual impact of tariffs has not yet materialized. "The direction of growth risk is clear: slowing down." He recommended shifting towards defensive sectors such as utilities, consumer staples, and healthcare as safe havens. He also suggested diversifying investments through the Invesco S&P 500 Equal Weight ETF (RSP) and favoring low-volatility funds like the iShares MSCI USA Minimum Volatility ETF (USMV) and high-quality stock funds like QUAL.

Essaye concluded, "We have enjoyed this rebound, but the market's indication of fundamental improvement is actually an overreaction to the 'disaster not happening.' This rally is like dancing on thin ice."