Complacent over tariffs is dissipating. Stocks began to rise at lower income prices, partly due to tariffs. Although the Trump administration opposes this, the market believes that tariffs mean higher inflation and lower growth. After Trump’s election, stocks initially gathered on Trump’s commitment to reducing regulation and a commitment to lowering corporate taxes from 21% to 15%. Investors and analysts have chosen to ignore tariffs because it is widely believed that Trump will not impose them. Earnings are disconnected, which creates a disconnect between stock prices and earnings: Stock prices have been rising, but earnings estimates “have not improved as they did (expectedly) under Trump.” Earnings estimates are not yet as fast as expected, as analysts have not yet obtained a clear signal from U.S. companies. Now, belief that Trump will not impose tariffs has disappeared, which may open the floodgates for lower income estimates. “The market may think Trump is bluffing, but if global leaders believe they are bluffing, it could trigger a global trade war,” Raich said. Marc Chandler of Bannockburn Forex told CNBC that analysts cut revenue less than usual, and that’s not just tariffs. “There are a lot of title risks out there, from tariffs to growth rate drops to inflation, help and budget issues,” he told CNBC. “It’s not just tariffs, it’s about a different worldview.” It’s still early, but the “stew” of this title risk is starting to find its own way in earnings estimates. Analysts lowering revenue estimates in the first part of the quarter are typical. This is done because analysts are historically optimistic and often adjust their estimates downward when they realize they are too optimistic. But these numbers fall faster than usual. From December 31 to February 27, the S&P 500’s first-quarter earnings fell by 3.5 percentage points, according to FACTSET’s John Butters. This is lower than the 5-year average (2.6%), the 10-year average (2.6%), the 15-year average (2.4%) and the 20-year average and the 20-year (3.1%). These are not huge cuts, but recent price action in the stock market shows investors are nervous that these cuts may get bigger. On LSEGs using similar databases, estimates for all 11 S&P 500 sectors fell in the quarter, but estimates for cyclical sectors such as consumer discretion and industrial stocks fell significantly, which were closely related to the economic situation. Earnings for the first quarter: January 1 January 1: February 28 is rising 10.9% faster: January 1 January 1 growth 1.1% industrial group: February 28 growth 12.3% higher: January 1 January 1: February 28 rise 5.6% higher: February 28 rise 10.2% lower: 5.9% lower: 5.9% lower, some companies have fought specific wars on the expropriation advantage. Target and Best Buy both warned this week that tariffs would make consumers more expensive. Which side are you betting on Trump? Ultimately, it all comes down to which side Trump bets. Are you on the side, thinking that global leaders will call him bluff and cause a trade war, or are you on the side, thinking that Trump will negotiate his escape from the trade war with little damage? Differences of opinion. “The most important thing is that the market doesn’t like to bring Trump’s face value to the face value because he’s too vague.” “I don’t think Trump wants to collapse the global economy.” Marc Chandler was also in that camp: “Most people still think there will be a deal,” he said. Others are not sure. Raich told me that “Trump is unpredictable,” he admits that many still think he will be able to negotiate a deal of some sort that will allow him to back down on tariffs. “It’s a dangerous chicken game, and the market isn’t fully priced yet.” Commerce Secretary Howard Lutnick hints in an interview with Fox Business that President Trump may propose a compromise: “You do more, and I’ll meet you somehow,” he said. Others may not have a strong opinion, but are surprised at the level of daily title risk. “I left the table and came back and said, ‘What happened just now?’,” Jay Woods of Free Capital Markets told CNBC. “Trump didn’t take a break.”
The market starts to price at weak income, uncertain growth is uncertain | Real Time Headlines
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