Trump shaking up market for now, but only trade wars would bring big sell-off: Analysts
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The president's trade actions and personnel shake-ups are causing turbulence for the market, but for now, analysts do not see a major sell-off unless a full-blown trade war breaks out.
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Trump abruptly let go Secretary of State Rex Tillerson just after agreeing to talks with North Korea, and a few other shoes are expected to drop in coming days.
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The Trump administration is now threatening trade actions against China, after broadly imposing steel and aluminum tariffs.
President Donald Trump has been injecting uncertainty into the stock market lately, and the jolts and volatility could continue as long as investors worry about trade wars.
But analysts see market turbulence, for now, not necessarily a deeper sell-off.
"If you look historically, political headlines tend to bother people for about 15 minutes, and the market tends to move on. Even concerning political headlines tend to not roil the markets for sustained periods in general," said Jonathan Golub, Credit Suisse chief U.S. market strategist.
"I think the same applies to trade concerns," he said. "If we end up in a full-blown trade war, that would be bad. But at this point in time, we're far away from that."
Stocks were rocky Tuesday morning after Secretary of State Rex Tillerson was let go by the White House, just days after the administration agreed to talks with North Korea. The market brushed that off.
But stocks really tumbled when reports started to circulate Tuesday afternoon that the Trump administration could slap tariffs on China on technology, apparel and other imports. Under consideration were also investment and visa restrictions.
The Dow closed off 0.7 percent to 25,007, and the tech-heavy Nasdaq lost 1 percent to 7,511. The S&P 500 was down 0.6 percent at 2,765. It is 3.75 percent away from its high after February's market sell-off, which was kicked off by interest-rate concerns, not political drama.
Dan Clifton, head of policy research at Strategas, said the Tillerson move will no doubt be followed by other shake-ups but that should not send longer-term shock waves through the market.
"It's possible that H.R. McMaster goes," Clifton said. "I think John Bolton might replace him as national security advisor." Bolton is a former U.N. ambassador who is viewed as hawkish.
"You're getting a much more Trumpian administration," Clifton said. "Bolton seems more Trumpian than McMaster. Larry Kudlow seems much more Trumpian than Gary Cohn ." Trump earlier said that Kudlow, CNBC senior contributor, has a good chance at succeeding Cohn as his top economic advisor.