There is a gob of Play-Doh newly enmeshed into my bedroom carpet. Normally this would set-off a material increase in tempers while I mentally calculate how much this is going to cost me. But it could be worse. It’s not like they made a $6 trillion mess for someone else to clean up, observes Amber Kanwar, host of the In the Money with Amber Kanwar podcast.
Citi’s US equity strategist says 4,700 is where the S&P 500 would be fully pricing in the impact of tariffs (7% lower from here). It is very possible we enter a bear market this week. The last bear market (20% drop from peak) was in 2022. But it occurred over a period of 10 months. This “tariff tantrum” happened in 1.5 months.
Over the weekend, the US administration showed no signs of blinking with President Trump signaling that the pain is necessary to correct their perceived trade imbalances. While equity investors have been bearing the brunt of this pain, bonds have been rallying.
SPY, XLF (YTD % Change)
The US 10-year yield dropped below 4% for the first time since October before rebounding a bit. Oil prices are trading around $60 per barrel, the lowest level since 2021. In Trumpian terms, he can take credit for lowering interest rates and the price of gas!
Meanwhile, bank stocks in Canada and the US have come under pressure as recession odds grow. Morgan Stanley is downgrading the banking sector in a note that says the risk of a bear case recession scenario is “rising sharply.” Jamie Dimon, the CEO of JPMorgan Chase & Co. (JPM), urged a quick resolution in his annual letter to shareholders.
He warned the longer this situation persists, the harder it is to reverse the negative cumulative effect. The elder statesman of Wall Street offered a clear-eyed assessment of Trump’s policies without naming him. “America first is fine, as long as it doesn’t end up being America alone,” Dimon said.
JPMorgan reports quarterly results this Friday, unofficially kicking off the US earnings season and giving investors an opportunity to hear directly from CEOs about how tariffs will affect business. Canadian banks have been hurt as well, trading at a seven-month low and down 10% from their recent peak. Estimates are being cut across the board.
