The stock market was slumping after President Donald Trump made his tariff announcement To put it plainly, things were even more dire than investors had anticipated, and now they must determine the implications for stock prices for the remainder of 2025.
On Wednesday, during the "Freedom Day" celebration at the White House Rose Garden, President Donald Trump declared reciprocal tariffs. He stated that a base tariff of 10% would apply universally; however, specific nations would also face extra "reciprocal" duties. These new taxes seem to add onto previously mentioned levies for automobile imports and from China. As anticipated, car imports will incur a tax rate of 25%.
The SPDR S&P 500 exchange-traded fund decreased by 2.2% during post-market hours. It appears that the reciprocal tariffs along with the 10% base tariff might be responsible for this decline. Additionally, the Roundhill Magnificent Seven ETF fell by 2.4%.
"President Trump has concluded his tariff address at the White House, and according to Wedbush analyst Dan Ives, these new tariffs are 'even worse than what the market had anticipated as the worst-case scenario,' " he notes.
There is cause for optimism. The S&P 500 has dropped approximately 8% from its recent peaks, encapsulating much negative information. Should conditions improve on Thursday, investors ought to monitor the 5750 mark during an upturn. Surpassing this threshold "would definitely bolster the argument that the most severe part of the correction may have passed," according to experts. Jason Browne , who leads the Texas-based investment advisory firm Alexis Investment Partners, expresses optimism that Wednesday signifies the market moving beyond "peak uncertainty."
However, the drawback is also significant, with 5500 possibly serving as the next support level. Regardless, the announcement indicates that volatility is here to stay, according to Venu Krishna The chief U.S. equity strategist at Barclays has noted several uncertainties following tariff implementations, including potential retaliations, rising inflation levels, shifts in consumer expenditure patterns, and changes in industrial output figures. Recently, Krishna revised downward his forecasted earnings per share for the S&P 500 in 2025 from $271 to $262 and continues to scrutinize various situations that might erase all projected profit increases anticipated for 2025.
Krishna remains optimistic regarding large technology stocks despite the current climate. The price-to-earnings (PE) multiples for companies like Apple, Amazon.com, Alphabet, Meta Platforms, Microsoft, and Nvidia have dropped to around 24 times their earnings, which represents a decline of approximately 25% from their most recent high point at 32 times. This makes the tech industry an attractive refuge. According to Krishna, as long as technological profits keep expanding, "where better could one seek shelter should circumstances deteriorate?" he questions pointedly.
However, they aren’t performing well during after-hours trading. Apple has seen a drop of 6.1%, Amazon.com is down by 5.1%, Alphabet has decreased by 3.3%, fell by 4.6%, Microsoft has slipped by 2%, Nvidia’s value has reduced by 4.9%, and Tesla has plummeted by 5.8%.
Apart from sector rotation, some Wall Street analysts remain cautiously upbeat even with the decline on Wednesday. "We should avoid completely avoiding risks or moving entirely to cash strategies that limit potential gains," states Arnim Holzer, Global Macro Strategist at Easterly EAB Risk Solutions.
Nevertheless, the likelihood of things going terribly awry remains substantial, as Holzer admits. He characterizes this situation as a "fabricated emergency," implying that it could either be swiftly resolved or escalate further.
Mutual tariffs provide opportunities for discussions yet they also pave the way for increased suffering and unpredictability, states Adam Hetts, who leads multi-asset strategies globally at Janus Henderson Investors. "The imposition of substantial duties on an individual nation-to-nation level indicates 'a negotiation strategy,' keeping investors edgy indefinitely," he notes. "Despite witnessing this administration’s unexpectedly robust endurance against market distress, the crucial issue remains: How far can their resilience stretch when faced with genuine economic hardship during these talks?"
Up until now, the impact has primarily affected sentiment indicators; however, this situation could evolve. As Nigel Green, CEO of deVere Group, articulates, "This is how you undermine the global economic powerhouse while professing to boost it." Trump is dismantling the post-World War II framework that contributed significantly to prosperity for both the U.S. and the globe, all executed with an audacious sense of assurance.
A quality that appears to be missing at present.
Send your letter to Al Root allen.root@dowjones.com