President Trump hit the headlines again in a recent social media post which said ‘for decades the U.S has been ripped off and abused by every nation in the world, both friends, or foe. Now it is the time for the good old USA to get some of the money, and respect back. God bless America.’
The result of this along with an announcement of imposing 25% tariffs on imports of finished cars and certain car parts was more than enough to create added market anxiety with share prices nose diving across the world.
Liberation day is (2nd April) today according to President Trump and the White House staff have been busy studying and investigating all the country’s trading relationships. All reports should have been fed into the President by yesterday so that he can make important tariff announcements at 8pm, our time tonight.
These are to include the suggested tariffs for Canada, Mexico, and China. There will also be mention of the reciprocal tariffs to compensate what Trump believes are unfair taxes, regulation or even subsidies that the US has suffered for decades. Producing specific country tariffs is fraught with complexity so do not expect matters to become clear as decisions may be ‘fudged’ for weeks.
Those investors of a more positive nature imply that the well-known stock market adage ‘buy the rumour, sell the fact’ is about to be turned on its head. In short, investors know about the Trump tariffs and have been persistently selling but will be buying back when the actual announcement is made. Although this is logical it pre-supposes that the tariff uncertainty can be resolved. This is unlikely due to tariff complications so nervousness could remain and with it the volatility investors hate.
Investors also had to confront last week, the disappointment of the Federal Reserve’s preferred inflation measure which rose more than expected to 2.8% and that Americans were saving more rather than spending. All told, this is not good news for those hoping that further interest rate cuts will come to the rescue of a slowing US economy.
In two weeks, time, we see the start of the US first quarter reporting season, with investors looking for clues as to how companies are coping with the tariff uncertainties and whether it is changing investment plans, and the potential take on of new employees.
Closer to home, the Spring Statement from UK Chancellor, Rachel Reeves proved a damp squib. Fortunately, the market liked the discipline of relying on spending cuts rather than higher taxes to restore budgetary headroom to comfortable levels in the years to come. Sadly, the Office of Budget Responsibility now predict growth of just 1% this year – a sharp drop from the earlier prediction of 2% made just six months ago.
Two other data points this week will be watched closely, including the expectation that US manufacturing survey will fall into negative territory after two months of decent increased activity.
Finally, the US March employment data on Friday is likely to see a gentle slowdown to just 135,000 new jobs. Should the number prove lower, it could add to the current gloom in financial markets amid speculation of a potential US recession this year. Goldman Sachs increased their probability of this happening to 35% from a previous 20% given the worrying household and business confidence data we are now seeing.
Author David Gorman
