Investors struggle to keep up with tariff court rulings
News that the US government will appeal a court decision on tariffs has reminded investors that the short-term picture remains full of uncertainty.
Tariffs back on after Trump appeal
In what was perhaps an expected development, the Trump administration has managed to get its tariffs reimposed following an appeal.
While markets rallied strongly on the initial announcement of the court’s decision to rule the tariffs as unlawful, the reaction was short-lived. Markets have already enjoyed strong gains since early April, and since an appeal was likely investors were not going to be too keen to push stocks higher in the short term.
This legal back-and-forth is set to continue for some time, which will not help reduce uncertainty for investors. In the meantime, trade negotiations will continue, and there are reports that some deals may be moving towards a conclusion.
Where do we go from here?
Markets have shown remarkable resilience since the first tariff pause announcement. The real test comes in June, when the data from May begins to provide a clearer indication of how the US economy has fared.
Will inflation start to rise from here as prices are increased to reflect the impact of tariffs? Will business activity weaken as demand weakens? The current earnings season is almost over, now that Nvidia has reported, and there is around six weeks until the next earnings season begins. This will cover the second quarter (Q2), one where tariffs will have had an impact.
No sign of an imminent recession
The longer-term prospects of the US economy still look good. Even if the US were to suffer a period of weaker growth, long-term investors who look to drip feed money into markets on a regular basis will be able to buy at lower prices and more attractive valuations.
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