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Market participants are hoping for a shift in the current tariff situation, with many seeking a resolution or deal to ease the uncertainty.
Piper Sandler chief investment strategist Michael Kantrowitz joins Morning Brief to discuss how the market (^GSPC, ^IXIC, ^DJI) is largely driven by policy rather than economic data right now, and why a quick resolution of the tariffs is unlikely and will lead to continued volatility.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
So then what are market participants hoping for? What is the big great hope that you're hearing from folks? Because I can't find anyone, none of my sources have said that they are positively viewing these tariffs at this point. They just want them to go away. So what is the hope from participants that you're speaking with?
Yeah. Um, you know, so I've been trying to focus on, you know, what could go right? Because I think, like you said, the, the, the negative outlook and, and the bearish story is really easy to make, uh, particularly if these tariffs all stick. Uh, and so, uh, it's unlike again, any period in history in that usually markets go down because there's an oil shock or an interest rate shock or an inflation shock or, uh, unemployment shock, a recession. Uh, and so you have data to look at, you can kind of, we see, we know how the business cycle works more or less. We know how the Fed will react. In this period, in this backdrop, it's really, uh, the, the, the policy that's driving everything thus far and not so much the economic data. We really haven't seen much bad economic data, uh, at least with respect to hard data, because all this has happened so quickly. So, um, it, it, it makes it, you know, people want to see better, uh, some kind of, um, wavering, I guess, or some deals being structured. But, you know, I think the expectations that the market's just going to bottom and shoot back up, and that Trump's going to, you know, wipe out all these tariffs is, uh, very unlikely. And I think we're going to be dealing with, uh, quite a bit higher level of uncertainty for some time. You know, maybe we, we get some news on some deals or some negotiations start with China, uh, but you know, maybe they break down in a month. Uh, and so, or maybe Trump, President Trump gets, uh, uh, wants to go, you know, uh, gets upset by China and says, okay, the tariffs are back on. And so this is all possible. And, uh, I think that's going to maintain a high level of uncertainty in markets that are going to be quite choppy and very, uh, driven by the news. You know, the other potential near-term catalyst could be that the courts put a stay on some of these tariffs, uh, that, that was, um, you know, or there's some delay in them. Uh, but again, that's a short-term band-aid, not a long-term bull case necessarily.