Does the Trump bear market bring the S&P 500 Index down to 4000? Does it result in a drop of S&P earnings (2025–2026) from the pre-Trump Tariff War estimate of $260–$270 down to the $200–$220 range?
Worst case: Yes! With a serious recession and more upheaval.
Best case: Rapid trade deals are made, and the tariffs are quickly reversed. Market sentiment remains injured, but actual earnings are not as badly hit, and the stock market recovers in the medium term. Remember, the tariff levels presently anticipated are the highest in over a century.
Trump is unpredictable, and his approval rating is falling in the polls. Some Republican supporters are distancing themselves from him. Even Senator Ted Cruz is a tariff critic. Old advice from sailors: “When the rats are leaving a sinking ship, follow the rats.” Opposition to Trump’s unbridled power to impose tariffs is now growing among some GOP senators (“7 GOP senators sign on to bill to check Trump’s trade authority,” https://thehill.com/homenews/senate/5236142-congress-tariff-bill-trump/). On the House side, Don Bacon (R-Nebraska) has stepped up to propose that Congress take back the authority to decide tariffs in anything other than an emergency (“Bacon to introduce bill to give tariff authority back to Congress,” https://www.ketv.com/article/bacon-to-introduce-bill-to-give-tariff-authority-back-to-congress/64401194). Time will tell what measures might be taken.
Here’s a reading/viewing list for those who want diverse views and serious evidence.
We compare the US blockade of the Strait of Hormuz with selected blockades from WWI to the present and identify some limits of using economic isolation in a war ceasefire scenario.
Rapidly developing war-related negative sentiment sinks global stock markets. Then, a reversal and a powerful rally occur. The S&P makes a new high in record time. How to see this volatility? What I do with stock vol.
Is it a blockade or is it a siege? These are forms of war not usually examined by the current crop of younger financial market agents. We advise studying history of sieges and their connection to economics.
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