WHAT IS THE OUTLOOK FOR THE US STOCK MARKET?

22.04.2025 The US stock market has fallen around 15% from its peak as President Trump’s tariffs have hurt market sentiment. Below we look at the outlook for the rest of the year.

Goods entering the US are currently subject to a 10 percent universal tariff (with some exceptions). Chinese goods attract a punitive 145 percent tariff.

The headline impact of the new tariff regime will be to raise inflation and slow growth. Consumption will be especially affected as it is effectively a tax on consumers. The economic disruption will not be confined to imports. Goods that are made in America are still likely to have their supply chains disrupted. This is because imported components are also subject to tariffs.

The uncertainty generated by President Trump’s policies is also likely to negatively impact the economy and markets. For instance, the much higher ‘reciprocal’ tariffs have only been paused for 90 days. As it is extremely unlikely that US officials will be able to conduct 60 sets of parallel trade negotiations the question is what will happen after the 90 days have elapsed. Also, Trump’s attacks on the central bank have raised concerns that he will fire its Chairman Jerome Powell. Any perceived loss of independence for the US central bank would be taken badly by US equity and bond markets.

In the coming months the US economy faces the prospect of a significant slowdown in growth. This is likely to test the nerves of the stock market. As such talk about a recession in the United States is only likely to increase.

The US stock market has corrected by about 15 percent from its February 2025 peak. However, to offer value it needs to have priced in the risk of a recession. On this basis I would judge that it still has further to fall.

For information only. Investors should seek professional advice for their own circumstances before making an investment.

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This post was written by Robin