This week, U.S. stocks staged a strong rebound, with the Nasdaq rising over 2% daily for several days. Key positive news includes Trump clarifying he has no plans to fire Fed Chair Jerome Powell, and hopes for easing U.S.-China tariff tensions.
Trump claimed that tariffs on China, currently at 145%, will be significantly reduced, as both sides agree the current levels are unsustainable.
If Trump 1.0 was a chaotic whirlwind where markets hinged on his words, Trump 2.0 feels even more fitting. Honestly, Trump’s daily statements now feel like market noise to me. This noise creates volatility—drops one day, gains the next—offering buying opportunities. However, this noise and uncertainty aren’t without impact on market fundamentals.
After all, regardless of how tariff talks progress, existing tariffs persist. And who knows how long these negotiations will drag on?
JPMorgan Chase CEO Jamie Dimon, in recent interviews, shareholder letters, and earnings calls, repeatedly highlighted real-time changes in market and economic fundamentals he’s observing as the head of the largest bank.
There are ways to counter this roti prata noise and unfair trade practices. Industrial policy is one, but if poorly executed, it’s better avoided. The 90-day tariff suspension and softening stance toward China are positive signs compared to the reckless approach before.
In a recent interview, Dimon didn’t say it outright but implied the U.S. needs a smarter approach to tariffs. He noted that China and Russia aim to dismantle the post-World War II system. The goal of trade policies should be to strengthen allies like Europe, Japan, South Korea, and the Philippines, not weaken them, while bolstering military capabilities and protecting trade critical to defense.
Dimon pointed out past mistakes, like U.S. farmers’ reliance on China for exports, which left them vulnerable. Recent White House signals—whether Trump is willingly adjusting or bowing to reality—suggest a move in this direction. On April 23, the Treasury Secretary emphasized “America First, but not America alone,” a hope the market needs to avoid losing control entirely.
A senior White House official said tariffs on China might drop to 50–65%, with the government considering a tiered approach, similar to China’s proposal last year: 35% tariffs on non-security-threatening goods and at least 100% on items critical to U.S. interests. This aligns somewhat with Dimon’s views.
Even if supply chains diversify, over-reliance on one country remains risky. Shifting production, like moving from sneakers to guns, takes time. Sneakers aren’t critical; military supplies are.
Of course, these are just ideas, hinging on smooth negotiations. Memories of Trump 1.0’s U.S.-China trade talks linger. Meanwhile, tariffs are already impacting market fundamentals. In Dimon’s latest shareholder letter and earnings call, he noted many companies have shifted from strategic priorities to short-term tasks, like optimizing supply chains and navigating the current environment.
Many corporate clients are in wait-and-see mode. This means companies planning to expand, hire, or invest in innovation are holding off. Shernice doesn’t usually focus on isolated cases, but this time it’s notable. Analysts have already cut S&P earnings growth forecasts by 5%. The current estimate is 5% growth, down from 10%. I predict this could drop to zero or even negative 5% within a month.
For Q1 2025, S&P earnings grew 3% year-over-year compared to 2024. If growth forecasts hit zero, analysts expect flat or shrinking earnings in coming quarters, dragging down stock prices before earnings reports confirm it.
In the coming weeks, thousands of companies will release earnings, sharing outlooks. Many will likely withdraw revenue forecasts, citing impacts from tariffs, customers, markets, and margins. Each company’s situation varies.
Dimon noted this wait-and-see attitude resembles recessionary behavior. Despite a soft landing so far—consumers spending, corporations profitable—much of this stemmed from extraordinary fiscal stimulus during COVID ($11 trillion borrowed and spent). Now, companies are signaling caution, pulling back on guidance and investment. They may be waiting for clarity on tax policies, hopefully resolved by July.
Typically, companies only withdraw guidance when uncertainty is high, as it fuels market panic, confirming things are bad enough that executives can’t predict what’s next. For example, Apple last withdrew revenue guidance due to COVID. Tesla, in its recent earnings, cited tariff uncertainty (among other factors) for withdrawing its full-year sales guidance. Footwear brand Skechers saw its stock drop after retracting its 2025 outlook. Delta Air Lines also withdrew guidance.
Dimon’s recession prediction—more precisely, his economists’ 50% probability—suggests a real risk. To avoid the “hard landing” Dimon warns of, I believe Trump must quickly secure trade deals. Even partial progress could reduce the wait-and-see stance among businesses and investors. As investor confidence returns, we may look back and see this market volatility as not entirely bad.
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