Investors hoping for stability in the markets following President Trump’s April 2 tariffs deadline may need to brace for continued volatility instead.
While further details on Trump’s “reciprocal” tariffs are expected by the close of business on Wednesday, it may take several days for major U.S. trade partners to assess the impact and formulate a response.
According to Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, investors will be keen to understand the ultimate goal of these tariffs and the timeline for resolution.
Market pressures have already pushed stocks into correction territory, with the S&P 500 experiencing its steepest quarterly decline since Q3 2022, as per Dow Jones Market Data. The downturn suggests that investors have adopted a more cautious stance on corporate earnings, though Draho believes peak tariffs are unlikely to persist.
For stocks to regain momentum, upcoming economic data will need to ease recession concerns. Alternatively, if economic conditions worsen, a shift in trade policy from the Trump administration or a monetary policy pivot by the Federal Reserve might be necessary to restore confidence.
A Limited Policy Window?
President Trump pledged to usher in a “golden age” for America in his second term. So far, only gold prices have reflected that sentiment, repeatedly reaching record highs.
Instead, Trump’s focus on tariffs, immigration, and government reduction has dampened consumer sentiment, fueled inflation fears, and heightened recession concerns—allowing European stocks to outperform their U.S. counterparts. While Trump’s administration describes this as a necessary “detox” of the U.S. economy, they may have only a short window to implement their broader policy agenda, which includes tax cuts, deregulation, and federal downsizing.
The 2026 midterm elections will soon dominate political discussions, and economic indicators must remain stable to sustain policy momentum.
After weeks of uncertainty, April 2 is expected to bring clarity—perhaps a framework for businesses and trade partners to understand how tariffs will be applied, suggested Bill Campbell, global bond portfolio manager at DoubleLine. While global corporations appear willing to adapt to Trump’s tariffs, they require a clear mechanism for compliance costs, potential rebates, and infrastructure planning timelines.
“The administration must tread carefully,” Campbell cautioned, noting the administration’s “razor-thin majority in Congress” and the interconnected nature of its policy initiatives. “What they don’t want—or can’t afford—is a sharp economic downturn and a surge in unemployment.”
Trump has framed the Republican victory in November’s election as a mandate for swift action. Following April 2, his administration is expected to pivot toward other priorities within the first 100 days, particularly fiscal policy.
“Fiscal policy will take center stage in April,” said John Velis, Americas macroeconomic strategist at BNY. “There’s a massive shift in policies underway, and everyone recognizes that.”
However, a further economic slowdown could weaken stocks, especially if the Federal Reserve is compelled to cut interest rates. Lower rates would enhance the appeal of bonds, which still offer some of the highest yields seen in the past decade, noted Robert Tipp, chief investment strategist at PGIM Fixed Income.
“In that case, the downside risks would be concentrated in cash and equities,” Tipp warned.
On Monday, the Dow Jones Industrial Average recorded its worst quarter since Q2 2024, while the Nasdaq Composite saw its largest quarterly decline since Q2 2022, according to Dow Jones Market Data.
