Is the Market Breathing a Sigh of Tariff Relief?
The stock market had a surprising reaction to looming tariffs on Monday afternoon.
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After being pounded on Friday, the indices gapped down on Monday morning, but as the day progressed, the gloom began to lift. Perhaps these tariffs won't completely destroy the economy.
Trump is scheduled to announce his tariffs on Wednesday, and there is still little known about how they will be designed, but the entire market has been suffering from the uncertainty. Many stocks and sectors will be unaffected, but general concerns about the economy have been weighing on everything.
The indices ended up closing well off the early lows and at the highs of the day. Some of this positive action may be due to the fact that it's the last day of the first quarter of 2025, and there are likely some portfolio moves being made by large funds. The underperformance of equities against bonds likely caused some equity weighting to be increased. The first day of a new quarter also tends to benefit from new inflows into 401(k) and other tax-advantaged funds.
The DJIA was the leader, with a gain of 1%. The S&P5 00 was up 0.6%, but continued weakness in technology and the Magnificent Seven kept the Nasdaq 100 QQQ close to flat. Small caps lagged with a drop of 0.5%, but breadth was very close to even.
There is still no certainty about tariffs, which will likely result in continued volatility. Fox Business is reporting that President Trump is considering multiple tariff plans and may not decide until right before the planned April 2 announcement. Trump has always been concerned about the stock market's reaction to his policies, and this poor action may have had some influence on his tariff decisions.
While the intraday bounce and strong close on Monday relieved some of the doom and gloom, there is no reason to believe it was a meaningful shift. If it wasn't the last day of the quarter, it would have been a more persuasive shift in character, but the high level of uncertainty is going to continue for a while.
At the time of publication, DePorre had no positions in any securities mentioned.
