Beyond Tariffs: More Uncertainty for Investors
Investors anticipating market stability after President Trump’s April 2 tariff deadline may need to prepare for ongoing turbulence instead.
While further details on Trump’s “reciprocal” tariffs are expected by Wednesday’s close, it may take several days for major U.S. trade partners to assess the situation and formulate a response.
Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, noted that investors will be focused on understanding the long-term implications of these tariffs and the timeline for resolution.
Market pressures have already driven stocks into correction territory, with the S&P 500 recording its steepest quarterly decline since Q3 2022, according to Dow Jones Market Data. The downturn suggests investors have adopted a more cautious outlook on corporate earnings, though Draho believes peak tariffs are unlikely to remain in place permanently.
For stocks to regain momentum, upcoming economic data must alleviate recession fears. Alternatively, if economic conditions worsen, a shift in trade policy from the Trump administration or a monetary policy adjustment by the Federal Reserve might be necessary to restore confidence.
A Narrow Window for Policy Implementation
President Trump has vowed to bring about a “golden age” for America in his second term. So far, only gold prices have mirrored that aspiration, repeatedly reaching record highs.
Instead, Trump’s focus on tariffs, immigration, and government reduction has weighed on consumer sentiment, stoked inflation concerns, and heightened fears of recession—allowing European stocks to outperform their U.S. counterparts. While the administration describes this as a necessary “detox” for the U.S. economy, it may have only a short window to implement its broader policy agenda, which includes tax cuts, deregulation, and a smaller federal government.
With the 2026 midterm elections approaching, economic stability will be crucial in sustaining policy momentum.
After weeks of uncertainty, April 2 is expected to provide some clarity—perhaps a framework for businesses and trade partners to understand how tariffs will be applied, suggested Bill Campbell, global bond portfolio manager at DoubleLine. While global corporations seem willing to adjust to Trump’s tariffs, they require a clear mechanism for compliance costs, potential rebates, and infrastructure planning timelines.
“The administration must tread carefully,” Campbell warned, citing the administration’s “razor-thin majority in Congress” and the interconnected nature of its policy initiatives. “What they can’t afford is a sharp economic downturn and a surge in unemployment.”
Trump has framed the Republican victory in November’s election as a mandate for swift action. Following April 2, his administration is expected to pivot toward other priorities within the first 100 days, particularly fiscal policy.
“Fiscal policy will take center stage in April,” said John Velis, Americas macroeconomic strategist at BNY. “There’s a massive shift in policies underway, and everyone recognizes that.”
However, further economic slowdown could weaken stocks, particularly if the Federal Reserve is compelled to cut interest rates. Lower rates would enhance the appeal of bonds, which still offer some of the highest yields seen in the past decade, noted Robert Tipp, chief investment strategist at PGIM Fixed Income.
“In that case, the downside risks would be concentrated in cash and equities,” Tipp warned.
On Monday, the Dow Jones Industrial Average recorded its worst quarter since Q2 2024, while the Nasdaq Composite saw its largest quarterly decline since Q2 2022, according to Dow Jones Market Data.
