MW As tariff angst lingers, this wealth manager has just upgraded U.S. stocks

By Jamie Chisholm

Improving trade news and overly-depressed sentiment leaves the S&P 500 looking attractive

Early Friday futures show U.S. stocks will start the final session of what's been a frantic week on the front foot.

The optimists, who think U.S President Trump's swift tariff U-turn on Wednesday signaled the peak of trade-war angst has passed, are for now in ascendance. Just.

But recent market action has shown that the pessimists, who fret that the 90-day tariff pause just prolongs uncertainty - and because of the 145% levy on China at a much higher overall tariff rate, too - are lurking in the wings.

But, hey, financial markets are built on different opinions. That's why trades occur.

It's quite unusual, though, to have opposite viewpoints from the same finance house. On Thursday, we noted that UBS strategist Bhanu Baweja was advising investors to sell any rallies until more is known about how much tariffs will hurt the economy, and adding that it's possible the S&P 500 SPX could slip below 5,000.

However, in a note published Friday, a team of analysts at UBS Global Wealth Management, led by chief investment officer Mark Haefele, have upgraded U.S. equities to attractive, giving three main reasons for doing so.

First, they reckon that Trump's pause on what he calls reciprocal tariffs has reduced extreme economic and market risks. Despite China's tariffs going up to 145%, the move "demonstrated willingness from the Trump administration to change its stance in response to equity and bond market turbulence indicates some sensitivity to market stress, and points to the existence of a 'Trump put' in some form," UBS GWM says.

Next, they believe that news flow is likely to improve. Yes, they are wary that the spat with China may dislocate supply chains, and that the possibility - discussed by Treasury Scott Bessent - of Chinese companies being delisted from U.S. stock exchanges would damage sentiment. But with many countries indicating a desire to negotiate trade, there should be a variety of deals the administration will be keen to promote.

"We believe that progress on negotiations should provide encouragement for investors to look through near-term tariff-induced economic weakness and toward a return to earnings growth in 2026," say the UBS GWM team.

Finally, they note that equity returns after highly volatile periods have historically been positive. Using the Cboe Volatility Index, or VIX VIX, as a guide, they observe that when it reaches levels above 40 the average rise for the S&P 500 over the next year is 30%, with a 95% chance of a gain. The VIX was around 44 early Friday, having risen to 60 midweek.

The UBS GWM team also note that the S&P 500's 9.5% rebound on April 9, was the largest one-day gain since 2008, and the third biggest on record. And since 1950, there's been 13 one-day rallies of 6% or more and all subsequent one-year returns have been positive, with gains ranging from 10% to 63%.

Furthermore, investor bearish sentiment is very elevated because of the trade fears. For example, the latest American Association of Individual Investors survey showed 58.9% of correspondents held a bearish outlook, fearing stocks will fall more over the next six months. The previous week the AAII survey showed such bearishness at a one-year high of 61.9%.

"Notably, bearish sentiment has historically served as a contrarian indicator, with the S&P 500 averaging a 27% returns in the 12 months following instances where sentiment readings exceed 60%," say Haefele and team.

To be clear, they do worry about economic disruption if the tariffs on China remain in place, but after Trump's midweek tariff about-turn the risk of a more severe economic downturn is now more limited, they reckon.

"We have raised our downside scenario S&P 500 price target to 4,500 (which we consider to be more aligned with a "normal" recession), up from 4,000 (more consistent with a systemic crisis like the global financial crisis)," they say.

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are rising as benchmark Treasury yields BX:TMUBMUSD10Y dip. Oil prices (CL.1) are up and gold (GC00) traded above $3,200 an ounce for the first time.

The dollar index DXY fell below 100 for the first time since September 2023, and the euro $(EURUSD.FOREX)$ jumped to a 3-year high of $1.14.

   Key asset performance                                                Last       5d      1m       YTD      1y 
   S&P 500                                                              5268.05    -2.38%  -4.59%   -10.43%  1.33% 
   Nasdaq Composite                                                     16,387.31  -0.99%  -5.29%   -15.14%  -0.33% 
   10-year Treasury                                                     4.411      40.20   9.40     -16.50   -12.10 
   Gold                                                                 3239.2     5.99%   8.20%    22.73%   37.24% 
   Oil                                                                  60.22      -3.37%  -10.37%  -16.21%  -29.53% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Beijing said it would raise tariffs on U.S. imports to 125% in retaliation to the Trump administration imposing levies of 145% on Chinese goods.

JPMorgan $(JPM)$, Morgan Stanley $(MS)$, Wells Fargo $(WFC)$ and BlackRock $(BLK)$ are among those kicking off the first-quarter earnings season.

U.S economic data due Friday include the producer-price index for March at 8:30 a.m. Eastern, and consumer sentiment for April at 10 a.m.

Boston Fed President Susan Collins gives a TV interview at 9 a.m.; St. Louis Fed President Alberto Musalem speaks at 10 a.m.; and New York Fed President John Williams speaks at 11 a.m.

In a secret meeting, China acknowledged its role in hacks on U.S. infrastructure, according to a Wall Street Journal report.

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The chart

Trump's trade war will hasten the unraveling of globalization that made Asia the factory of the world and, as the chart below shows, gifted U.S. consumers cheap goods, notes Andrew Wishart, senior U.K. economist at Berenberg.

"Investors and policymakers are hardwired to equate weak growth with interest rate cuts," he adds. "However, the first-order effect of tariffs is to raise prices, not reduce demand. It would take a major contraction in U.S. demand to outweigh the impact of higher import prices on inflation."

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Taiwan Semiconductor Manufacturing  Security name 
   TSLA                                Tesla 
   NVDA                                Nvidia 
   GME                                 GameStop 
   AAPL                                Apple 
   TSM                                 Taiwan Semiconductor manufacturing 
   PLTR                                Palantir Technologies 
   AMZN                                Amazon.com 
   AMD                                 Advanced Micro Devices 
   NIO                                 NIO 
   MSTR                                Strategy 

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-Jamie Chisholm

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April 11, 2025 06:30 ET (10:30 GMT)

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