WHAT'S NEXT FOR STOCKS?

A chaotic tariff policy buffets investors looking for clarity on the economy and inflation.

- BY ANNE KATES SMITH

JUST weeks after hitting a record high, stocks spiraled dangerously close to a bear market in early April, then snapped like a bungee cord as the Trump administration's on-again, off-again tariffs whipsawed investors. From its peak on February 19, the S&P 500 index fell to within 1.1 percentage points of bear-market territory, defined as a drop of 20% or more, as Trump's tariff war escalated. More than $5 trillion in market value was erased in just a few days. Then, a reprieve. The White House announced a 90-day delay in the implementation of the most onerous levies on most of the countries facing them, and the broad market benchmark jumped nearly 10% in a single afternoon to close at 5457 on April 9—the biggest one-day gain since 2008. The next day? Down again.

Tariffs that took effect briefly in April were two-part: 10% on all imports, and so-called reciprocal tariffs for nearly 60 countries ranging from 11% to 50% and more. Although the 10% baseline tariffs remain, most of those reciprocal tariffs are paused—except for a 145% levy on Chinese goods, countering China’s 84% retaliatory tariff on U.S. products. Mexico and Canada are separate, operating under 25% tariffs that exclude goods compliant with earlier agreements (with some exceptions). Expect a volatile market—with significant shifts up or down—to continue to react to the trade news of the day. The stakes couldn’t be higher. “The expected fallout from ‘Trump 2.0’s Reign of Tariffs undercuts our former bullishness,” said strategist Ed Yardeni, of Yardeni Research, in an earlier note to clients. “It has also drained confidence in the U.S. economy on the parts of everyone from CEOs to consumers to investors.” Because consumers often bear the brunt of higher tariff costs, Moody’s chief economist Mark Zandi calculates that if all the proposed increases were to be implemented, the average American household would have to spend $2,100 more per year to buy the same goods they’re buying now.