Factset reported S&P 500 companies are “highly uncertain” for the balance of this year. This is well above the 10-year average of 179; and more than double the previous quarter. And it makes sense… it’s impossible to know what impact tariffs could have over the coming two to three quarters (or more). But what’s almost certain – any impact won’t be positive. We can say with certainty that tariffs (even if only 10%) are an economic burden – where I estimate the cost to both companies and consumers to be more than $300B. So who will pick up the tab?
China
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Will Common Sense Prevail?
For the past few weeks we’ve watched Trump double down on dumb. There are no winners from tariffs – only losers. Perhaps the biggest loser of all will be the US consumer… forced to pay higher prices for almost all goods. Is that the goal? From Trump’s lens – China has been “ripping the US off” for decades. Why does he think this? The President will cite the US’ ~$1T trade deficit with the Middle Kingdom… which has doubled in 5 years. But this isn’t necessarily a bad thing… here’s why
Markets Hedge as Momentum Wanes
As an investor – it’s very important to know the rules. For example, if the rules are constantly influx – it leads to uncertainty. With heightened uncertainty – you pull back. That’s what faces investors. For example, consider the following: (i) direction of monetary policy (e.g., as Powell raised concerns on inflation); (ii) A torrent of policy shifts from the White House; and (iii) major disruption with artificial intelligence – as investors question return on capital invested. Uncertainty in each of these buckets makes it hard to commit to stocks with conviction.