It’s just been two days since “Liberation Day,” but it feels like markets have experienced a lifetime of turmoil since President Trump unveiled that fateful, extremely meme-able chart.
America’s duties on Chinese imports rose to about 54% in total, and China did not take it lying down. Today, the Chinese government slapped a 34% retaliatory levy on all US goods in response.
Chinese stocks sank on the news: Alibaba ended the day down 9.89%, PDD dropped 8.32%, Baidu lost 8.21%, and JD.com fell 7.74%. Though to be fair, pretty much everything was down this morning, as the US broader market somehow found another cliff to fall off.
Now, even those who were trying to stay optimistic are losing hope.
“In the near term, we believe the effective tariff rates could be higher still, and without President Trump taking active steps to reduce tariffs over the next three to six months, we are likely to enter a downside scenario, including a meaningful US recession and lower equity markets,” wrote UBS CIO Solita Marcelli
UBS was one of many firms that lowered its S&P 500 price target today, reducing it from 6,400 to 5,800. It also downgraded US equities from attractive to neutral. Ouch.
Nobody wants to be just ‘neutral’
If there’s one thing we learned today, it’s that even international equities aren’t safe from the tariff-induced downturn. But the pros have some ideas about where to find a relatively safe haven.
“Given the uncertainty around these second order impacts, we continue to favor quality and defensive equities under the surface of the market,” explained Morgan Stanley Chief Investment Officer Mike Wilson in a recent note. “Meanwhile, Consumer Discretionary Goods likely remains the clear underperformer from tariff risk, in line with our long-standing view,” he added.
And while equities are getting pummeled, maybe consider upping your fixed income holdings. They’re boring reliable for a reason.
“We continue to rate quality bonds as Attractive,” explained Marcelli. “We believe consensus growth expectations are likely to come down in the weeks ahead, a trend which should be supportive of quality bonds.”—LB
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