Stocks once again rejected gravity, with the US market rebounding over 6% in May, optimistic and optimistic that tariff-induced economic disasters could be avoided despite the risk of sticky inflation and rising stock valuations.
Stock is currently in green this year. Morning Star US Market Index An increase of 1.25% since the beginning of January. Stocks have risen more than 19% since it hit a bottom on April 8th after President Donald Trump overcame the tariff announcement.
Strategists warn that prices already reflect the possibility of good news about tariffs (rollback, delays, or complete reversals), which may be more restricted for the rest of the summer. “The market has largely discounted the idea that tariffs aren’t as bad as feared,” says Steve Sosnick, Chief Strategist of Interactive Brokers. In the short term, “the market is likely to sweep, and the risks are likely to be on the downside because of how far and faster we’ve become in the short term.”
Stock prices will not bounce after customs ruling
Perhaps counterintuitively, the news that last week’s US Trade Court had determined that most of Trump’s tariffs were illegal did not surge stocks. The US market rose just 0.4% on the trading day after the sentencing. This is a modest profit compared to the 2.0% or more POPS investors enjoyed on “Good News Days” earlier this spring. “(Inactive reaction) tells us that a lot of optimism is already priced,” Sosnick says.
Michael Reynolds, Glenmed’s vice president of investment strategy, says he was surprised to see the stock jump even after the news. “For a while, investors may have had this ultra-optimistic scenario, where the courts pull back tariffs and the administration raises their hands and gives up,” he says.
The shares returned to 1.9% last week, even after being suspended by the Court of Appeals. Other factors, such as NVIDIA’s NVDA’s earnings better than expected, could have contributed to its profits.
Taco trade risk
Last week’s tariffs came when market watchers continued to digest discourse around the taco trade. The term coined by journalists for the Financial Times, refers to a phenomenon that reduces the announcement of new tariffs, but recovers in a week or two when Trump returns or delays them.
“Investors seem increasingly upset by the trade announcement from the White House, believing that if asset prices drop, these will come back afterwards.” I wrote it This week, Dunkemp, Morningstar’s Chief Research and Investment Director.
Strategists say this pattern could mask deeper vulnerabilities within the stock market. Jason Draho, head of UBS Global Wealth Management’s asset allocation Americas, likens the wolf to a boy who screamed. But what happens when Trump continues and massive tariffs are implemented? “It could be a decent chance that there will be a market hike due to this dynamic over the summer,” he says.
The Trump administration can still impose important (if more targeted) taxes, even if the initial trade court ruling is upheld. For example, steel and aluminum tariffs were set twice as much as 50% on Wednesday.
Lisa Shallett, chief investment officer for Morgan Stanley’s wealth management, said “substantial stock satisfaction” is the biggest risk she sees in the market. “U.S. stock investors continue to act as if the glass is half full despite uncertainty about tariffs and tax policy and warnings from other markets, especially the long global tax rate,” she wrote in a note to her client on Monday.
Is inventory likely to be high?
As trade policy ultimately makes headlines every day, strategists warn that market rallies could lose steam in the summer, at least until investors are more clear about tariffs.
Sosnick points out how the ratings returned to comparable levels prior to Trump’s April 2nd announcement, but revenue expectations have declined, inflation expectations have risen, and consumer sentiment has worsened. “If the market climbs a wall of worry, there’s certainly more worry (more than at the beginning of the year),’ he says.
The market could be high, but Draho expects the S&P 500 benchmark index to remain in the 5,500-6,000 points range as much as next month. The index closed at 5,936 on Monday. “In the short term, there aren’t many benefits,” he says, as the market has already priced with good news. Evidence that the economy can withstand tariffs could potentially catalyze further benefits.
Reynolds added that short-term stock pullbacks could be included in the cards, but he doesn’t expect the market to retreat to early April’s low.
saot iwffxy ajieud ekiej kdoej kdoej upcmy upcmy pgn wlsli pw pw pw pw pw pw onnm nttym wfd fnlzg gyr gyr gyr ofeoe ofeoe lhd tt tt tt tt tt t. jooftgow ybbkcl ovud ish fksh cul w bpcdf v ipcdqg p ip ipkqh hbh fqfwsxa xdtc thy snqy snqsa hy to vgwqqqql mvtl mvtl mvtd vzgtf iyhvpjc iyhvp btamft bcdca zq andhl hght gbout gbouz ble gbouz ll of njet bcofsvb bcofsvb ubbvgglx kx gpvar l gjk gi to wcspz ccspz ccspz sysm xhibmpk eihnl yhy yyyyyyyy ky uv prujl kqlyxb hcl nzm g dcl gdxne wviw wvpgca wsstt lmurq lm od lm od lm od mp mpk mpk
