A relief rally is sending US stocks (^DJI, ^GSPC, ^IXIC) higher as President Trump signals a softening stance on tariffs on Chinese imports. MetLife Investment Management chief market strategist Drew Matus joins Market Domination with Julie Hyman and Roundhill Investments CEO Dave Mazza to discuss the situation, arguing the damage has already been done.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
Stocks higher today as President Donald Trump seems to be softening his stance on China tariffs. Our next guest, however, says any attempts to reverse those tariffs may have arrived too late. For more, let's welcome Andrew Mattice, MetLife Investment Management chief market strategist. Drew, thank you so much for being here. So, uh, the rhetoric that we got today seem to be a little back and forth. Nothing's changing right now. The tariff on China remains 145%. So, sort of how, what is the timeline that we should think about as to when that would need to start to go down to prevent real damage? Or is it too late?
Uh, our survey is that it's too late. Uh, you know, once the equity market really responded to the tariffs in the way that it did, uh, and we saw a big decline in equity evaluations, what happens is the wealth effect. So, consumers spend some of the money that they feel like their wealthier by. Uh, and the longer they feel wealthier by whatever amount it is, they'll spend a little bit more of it. So, with equities, you're talking about a high-income consumer group, uh, that had up until the tariff announcement actually been seeing relatively stable and significant gains in equities. Uh, and now they had to rethink the permanence of those gains. And so, it causes people to pull back a little bit. Um, now, that being said, you know, China is not the only game in town. I know, you know, uh, your last discussion was a lot about China. Um, but there's talk about, uh, the US pivoting towards India and cutting a deal with them first. Uh, and that's the best way to kind of get others to the table, uh, is, you know, uh, you ask out their best friend. Uh, and so, um, not quite the great analogy there, but, you know, the US moving towards kind of an India story and working the trade barriers down with India, uh, will naturally draw other countries to the table and will be good for equities as we move forward.
So, Drew, I want to pick up on that wealth effect argument that you made a moment ago. So, we know that there's obviously a lot of talk from the administration just about sort of the, you know, the push toward Main Street. But sort of, what is the impact of sort of the wealthiest Americans who own most of the stock? Is that we're actually going to see a more material pullback first that then will lead through kind of lower income folks, um, kind of further struggling?
Well, that would be the worry. And it works because of this. Uh, upper income people tend to have the ability to choose to save or choose to spend. Whereas when we're talking about kind of lower income workers, they basically have to spend almost everything that they make. So, they're not really making a savings, uh, decision every month. Uh, and so, when you make upper income people nervous, they pull back on spending that otherwise would have been spent. Uh, and that reduces the potential need for labor to kind of, you know, sell them things, to, uh, serve dinners, etc. So, that upper income group actually leads the delta in consumption, the change in consumption that can happen in any given month. And that's why we focus on them so heavily is they're the ones making the decision that can mean the economy continues to move forward or begins to pull back and retrench, and people have to worry about losing their jobs.