MW Top strategists say stock market still bogged down by tariff uncertainty despite Trump's pause

By Christine Idzelis

'The biggest tax that Washington is levying on the American economy today is the uncertainty tax,' says J.P. Morgan's David Kelly

Top strategists on Wall Street say the White House has not yet done enough to dispel tariff uncertainty, leaving the stock market struggling to stage a durable rally.

The Dow Jones Industrial Average DJIA closed down 2.5% on Thursday, while the S&P 500 SPX slumped 3.5% and the technology-heavy Nasdaq Composite COMP plunged 4.3%. The ugly day for U.S. stocks stood in sharp contrast to the S&P 500's epic rally on Wednesday, when all three major benchmarks bounced amid an otherwise brutal April.

"The tariff problem is still there," said David Kelly, chief global strategist at J.P. Morgan Asset Management, in a phone interview. "That is superimposed upon an economy which people realize is getting hurt by a lot of other things, like DOGE cuts," further potential cuts to government spending and uncertainty over where to find workers because of an "immigration crackdown," he said.

Wall Street's so-called fear gauge climbed back to unusually high levels on Thursday, with the Cboe Volatility Index VIX ending at more than 40 to again close in territory that historically suggests a crisis. That's after the gauge subsided somewhat Wednesday on President Donald Trump's announcement that he was pausing for 90 days certain tariffs that he had rolled out on April 2.

The market realizes that if White House policies as they appear "right now" stay in place, the U.S. will probably end up in a recession this year, according to Kelly. A turnaround in the U.S. stock market requires "at least a stabilization of the tariff policy" and a "reversal" when it comes to the levy on China that White House has now increased to 145%, he said.

The S&P 500 ended Thursday at 5,268.05, booking its worst day since April 4, according to Dow Jones Market Data. The index is down 7.1% since the White House announced on April 2 its plans for so-called reciprocal tariffs, bringing the S&P 500's drop so far this year to 10.4%.

Buying stocks when the Cboe Volatility Index is surging to levels that suggest market panic, such as at around 45, historically has paid off in the the months ahead, said Barry Bannister, chief equity strategist at Stifel, in an interview.

"You have to buy when there's blood on the streets." he said. "Right now feels very bloody."

At least for now, Bannister said he's sticking to his 2025 target for the S&P 500 of 5,500. That's above the index's current level but below where it stood at the start of January. Bannister said that he's expecting clarity concerning the global trade war by June, and that the U.S. economy will slow this year but won't fall into a recession.

"There is still plenty of trade negotiation to go," said Scott Wren, senior global markets strategist at Wells Fargo Investment Institute, in a phone interview. "China is obviously the 800-pound gorilla," he said, with investors worried about the consequences of the large tariffs that the U.S. has imposed on the world's second-largest economy while Wall Street watches for a trade deal between the two countries.

Wren said that Wells Fargo Investment Institute is overweight the S&P 500 and U.S. midcap stocks on a tactical basis, meaning over the next six to 18 months. The S&P Mid Cap 400 index MID slumped 4.1% on Thursday, according to FactSet data.

"I would expect in the next month or two to see some positive news in terms of reaching agreements with some of our trading partners," Wren said. Trade agreements are needed to "hold the market in here and give people some confidence that these negotiations are moving along in a positive fashion."

Tariff uncertainty is tough for businesses to navigate.

"The biggest tax that Washington is levying on the American economy today is the uncertainty tax," said Kelly. "The problem is businesses don't know what to do," leading them to stop hiring and to cut costs, he said.

Meanwhile, putting "tariffs rates that amount to almost an embargo upon China" will lead to "massive disruption" for businesses of all sizes across America, according to Kelly.

"Tariffs are so destructive," he said. "That's why we really haven't had serious tariff rates since the 1940s."

-Christine Idzelis

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April 10, 2025 18:06 ET (22:06 GMT)

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