Stocks have been sold in recent days as investors digest President Trump's latest round of tariffs.
Headlines are expected to intensify in the coming week, with Trump’s “liberation day” looming on April 2nd mutual tariff deadline.
The big question for investors' expectations is to what extent Trump has imposed levies on trading partners and whether the move has led to further escalation of the trade war.
“The market will have a lot of digestion,” Veda partner Henrietta Treyz told Yahoo Finance. “And they will see the forward-looking and long-term appearance and long-term value of these tariffs, which are not yet priced.”
Ajay Rajadhyaksha, president of global research at Barclays Research, said on a phone call with reporters on Thursday that Trump's recent 25% car tariffs on foreign-made cars “are greater than what the market can achieve.”
“This is a statement of intent,” Rajadayaksha said. “It releases the risk that the market cannot dismiss on April 2. I think we will be surprised.”
The growing fear in the market is that expected tariffs may cause already sour sentiment and ultimately slow down the losses of economic growth. The impact of tariffs has prompted several Wall Street companies to lower their 500-year end goal. Barclays recently lowered its target from 6,600 to 5,900, the second highest target on the street.
Read more: What Trump’s tariffs mean to the economy and your wallet
If the final tariff rate is lowered to Barclays’ estimates of about 15%, the company will find that the potential downside risk for stocks is greater and the economy may fall into recession. The possibility of this result makes Rajadhyaksha tell the client to “defend as much as possible”.
“The defensiveness we remember in the last two and a half years,” Rajadhyaksha told Yahoo Finance in an interview after a media call on Thursday.
End: March 28 4:46:18 PM EDT
^gspc ^dji ^i tocie
Goldman Sachs' economic team also believes that the market will be surprised next week. Goldman Sachs' recent survey of market participants showed that investors may expect to receive a mutual tariff rate of 9 percentage points, according to chief political economist Alec Phillips. But Goldman Sachs’ team believes the initial proposed interest rates will be higher, possibly close to twice the expectations of market participants, Phillips wrote.
“Government officials made it clear that the upcoming tariff rates are the basis of negotiations, which incentivizes the government to propose higher rates from the outset,” Phillips wrote. “This happened in recent experience with Canadian and Mexican tariffs, which involved high prices twice, mostly or all, were revoked in a few days.”
