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Stocks were mixed on Monday as investors await a better sense of whether new tariffs are just a negotiating tactic — or, as Donald Trump has intermittently insisted, now a permanent part of the economic landscape.
The Nasdaq Composite index fell 0.1%, with the S&P 500 rising 0.6% and the Dow Jones Industrial Average adding 418 points, or 1%. The Magnificent 7 stocks clawed back early losses: Apple (AAPL+2.21%) and Google’s parent Alphabet (GOOGL+1.23%) closed higher, Meta (META-1.69%) was little changed, Tesla (TSLA+1.13%) was down 1.7%, Amazon (AMZN-1.08%) slid 1.3%, Nvidia (NVDA+0.54%) declined 1.2% and Microsoft (MSFT+0.24%) dropped 0.9%
Investors have mainly viewed Trump’s tariff plans as a negotiating tactic that will quickly disappear, not a permanent change, said Marta Norton, Empower’s chief investment strategist. The latter possibility looks increasingly likely but hasn’t been priced in to stocks.
“The market hasn’t wanted to see the tariffs as a real thing,” Norton told Quartz. “Investors aren’t prepared for the ideological scenario.” Permanently higher tariffs would directly boost companies’ costs, eating into profits and forcing investors to reassess stocks’ valuations, she said.
That said, the economy is still so strong that Norton views the risk of a recession, while rising, at below 50%. Goldman Sachs (GS+1.93%) economists earlier boosted their forecast odds of a recession in the next 12 months to 35% from 20%.
Trump’s scheduled April 2 tariff announcement will provide more clarity, but probably not settle the matter as this administration has shifted tactics, adjusted objectives, and changed rhetoric, Norton added.
Trump has pushed his team to be more aggressive on tariffs, encouraging advisers to apply a higher rate of duties on a broader set of countries, the Wall Street Journal (NWSA+0.71%) reported on Sunday. Advisers have considered instituting tariffs of up to 20% on almost all U.S. trading partners.
“Even if the tariffs are not as severe as painted, it’s still a sea change,” Norton said. “People have a hard time realizing that this a possibility given the state of play for the past couple of decades. It’s so immense that it’s hard to imagine.”