The stock market will be 'severely tested' by Trump's tariffs

President Trump acold exceeded Wall Street's worst fears with his "Liberation Day" tariff announcements, prompting galore strategists to reconsider their antecedently optimistic outlooks.

"Whether the Bull Market has ended and a Bear Market has begun volition beryllium contingent connected each politicians’ response, home and foreign, to “Liberation Day," Julian Emanuel, who leads the equity, derivatives, and quantitative strategy squad astatine Evercore ISI, wrote successful a enactment to clients Wednesday night. "Our basal lawsuit is that the Bull Market is being severely tested but volition stay intact."

Stocks sold-off swiftly arsenic markets digested the tariff announcements. The tech-heavy Nasdaq Composite (^IXIC) led the sell-off, plummeting implicit 5%. The S&P 500 (^GSPC) dove adjacent 4%, portion the Dow Jones Industrial Average (^DJI) tumbled astir 3.5%, oregon astir 1,500 points.

Thursday's losses intensified a month-long sell-off successful stocks that had already prompted respective Wall Street strategist to temper their expectations for the S&P 500. Now with Trump's ample tariffs further clouding the outlook, strategists are mapping retired however overmuch further the benchmark scale could sink.

The interest among strategists isn't conscionable astir the totality of Trump's existent tariffs which see up to 54% duties connected China and 20% levies connected the European Union. That unsocial could bring the US system to the "precipice of recession," according to Bank of America economists.

The larger fearfulness centers astir however different countries volition respond to the US tariffs, the imaginable sound connected effects from immoderate reciprocal tariffs and the further downside risks that would airs to the banal market.

Evercore's Emanuel added that retaliatory tariffs would "open further near-term downside for stocks," and could propulsion the S&P 500 down toward its 200-week moving mean of 4,677. This would correspond astir different 15% driblet successful the benchmark index.

RBC Capital Markets caput of US equity strategy Lori Calvasina wrote successful a enactment to clients that if the sell-down successful the S&P 500 holds beneath the caller marketplace bottommost of 5,521, she'd beryllium progressively acrophobic astir a "growth scare successful stocks." To Calvasina, this would correspond a scope of a 14%-20% drawdown from the S&P 500's astir caller all-time precocious and nonstop the benchmark scale arsenic debased arsenic 4,900.

"If that occurs, the 'bear case' that we mapped retired respective weeks agone of 5,550 astatine year-end 2025 whitethorn extremity up being a overmuch much due year-end terms people for the S&P 500 than our existent 'base case' people of 6,200," Calvasina wrote.