Matt Orton explains why dips are viable in the US market
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, Head of Advisory Solutions and Market Strategy,says following a strong rally, the US market's future direction hinges on marginal policy shifts, especially concerning tariffs. Investors should prepare for potential dips, particularly if they missed opportunities earlier. While earnings justify market gains absent tariffs, the market has already factored in a baseline tariff, reacting to specific trade deal developments and future progress.What we are going to continue to see is this back and forth. It has been happening since Liberation Day on April 2nd and the market has digested that. At first, the market prepared itself for the worst, very high tariffs across the rest of the world and the rally that we had through the month of April, throughout May has been quite spectacular. So, what the market has realised is earnings, the base from which we are going to come, how the economy has been growing, all of that is in a very solid place. The damage that tariffs are going to inflict is not going to put the economy into a recession. That has never been my base case and the pivots that we have seen from the administration help to confirm that.But now that we have had this strong rally and since we do not really have the positive catalysts of the earning season coming, I suspect the market is going to be driven by these marginal directional changes of administration. I tell investors to be ready to use some of that downside if they were not as aggressive towards the bottom of the market in April because again the market is going to be able to see through all of this once we start getting increasing clarity.: The markets are baking in some of that. Obviously, the markets are not baking in the entirety of zero tariffs going forward. The market has digested a 10% baseline tariff across the entire world and now the reactions are going to be very much with respect to who is getting more, who is having the trade deal signed, and where we might start to progress in the near future. When you look at earnings, you can justify the move that we have had in the market because absent tariffs is obviously counterfactual, but if we had not had tariffs put in place, we would probably be at 7,000 plus on the S&P 500 after an earnings season that was almost double of what expectations were.We have got some big companies like Nvidia reporting this week which are probably still going to be strong. I think the markets have baked in some good news, but they are not overestimating that, which is why I think dips are viable in the US market.Yes, there has been and when you look at all of the major global bond markets, there has been a lot of volatility and there has been a lot of steepening of yield curves, long-dated yields not just in the US but across all of the major economies and bond markets have been very elevated. Part of that is idiosyncratic, part of that is the large institutional buyers in those countries just have not been as aggressive. Japan, in particular, has not seen a lot of buying flow from pensions.If anything, there may have been a little bit of selling from some of the insurance companies that tend to be systematic buyers. But the Japanese economy is tied to trade. There is uncertainty with respect to where that direction is going to go, which is why any sort of trade deal that gets inked in the near future can be a very positive catalyst for that market because before we got into April and before you had the large reciprocal tariffs, Japanese earnings expectations were one of the only countries around the world where you actually had positive and accelerating earnings expectations from analysts.So, if we can get back to a place where there is more certainty around trade, that will benefit the Japanese economy overall. It is a country to keep eyes on, but don't wade into that too early.
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Time of India
35 minutes ago
- Time of India
Tariff Turmoil Ahead? Arvind Sanger flags growing risk for global economies
Tired of too many ads? Remove Ads "So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy," says Arvind Sanger , Geosphere Capital market is starting to realise that maybe the tariffs are going to sustain at a level higher than what the market was comfortable with. 10% tariffs was fine, but if you are talking about 15%, 20% 25%, 30% and the interesting thing is that none of the major trading partners neither Japan nor the EU nor India all of or Korea every time there is a talk, oh, now we are about to sign a deal with India, today it is oh, we are about to sign a deal with Japan, a few weeks ago it was oh, we are about to sign a deal with EU. I think nobody wants to be first because nobody is confident about whether any deal done with the US under this president is ever final or will he find some reason to recut the deal sometime in the near this tariff uncertainty has been receded by this acronym taco of Trump always chickening out, but the concern the market is now starting to face is that maybe Trump is trying to prove he is not taco and there could be some tariff related turmoil. So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy. So, there is enough uncertainty out there that I do not think the markets can keep rallying like they have for the last couple of is bad for all global economies. Let us be clear, this is not US wins or US loses, and the rest of the world is not affected. It is US loses and it is all the major economies that are beneficiaries of global trade and all major economies are, India is maybe less affected because India's merchandise trade is not as big a percentage of GDP than other countries but nobody is going to be unimpacted by that. So, I think that it is it is a negative for India along with everybody it is something we have to start worrying about. We have so far put that on the back burner assuming something favourable would come around, but it is looking things are looking uncertain and that is never good for global economies and certainly not good for India although, again as I said, India is probably one of the less impacted but again it will have an impact.
Economic Times
36 minutes ago
- Economic Times
Tariff Turmoil Ahead? Arvind Sanger flags growing risk for global economies
"So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy," says Arvind Sanger, Geosphere Capital Management. ADVERTISEMENT I want to get your sense on this reiteration of the trade tariff deadline of 1st August that the US has imposed once again. What is your take on that because countries can continue to negotiate after that, but this is when they will have to start paying the tariffs. We still have a lot of uncertainty in terms of major economies and where they stand with the US. So, how do you think the markets could react in the near to medium term? Arvind Sanger: The market is starting to realise that maybe the tariffs are going to sustain at a level higher than what the market was comfortable with. 10% tariffs was fine, but if you are talking about 15%, 20% 25%, 30% and the interesting thing is that none of the major trading partners neither Japan nor the EU nor India all of or Korea every time there is a talk, oh, now we are about to sign a deal with India, today it is oh, we are about to sign a deal with Japan, a few weeks ago it was oh, we are about to sign a deal with EU. I think nobody wants to be first because nobody is confident about whether any deal done with the US under this president is ever final or will he find some reason to recut the deal sometime in the near future. So, this tariff uncertainty has been receded by this acronym taco of Trump always chickening out, but the concern the market is now starting to face is that maybe Trump is trying to prove he is not taco and there could be some tariff related turmoil. So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy. So, there is enough uncertainty out there that I do not think the markets can keep rallying like they have for the last couple of months. Well, indeed that is what the question is about because for major economies the trade deal is not yet through and specifically with respect to India, what we are getting to understand is that the trade deal is on its way back to India from the US for now, it is the fifth round of talks between India and US that have already concluded but no major announcement or result from that is what we are getting to understand. How do you think markets are going to react to this particular news flow because we have already passed that deadline of 9th of July and even 1st of August is approaching now. But if till 1st of August as well, if no trade deal is being announced, what could be the market reaction? Arvind Sanger: It is bad for all global economies. Let us be clear, this is not US wins or US loses, and the rest of the world is not affected. It is US loses and it is all the major economies that are beneficiaries of global trade and all major economies are, India is maybe less affected because India's merchandise trade is not as big a percentage of GDP than other countries but nobody is going to be unimpacted by that. So, I think that it is it is a negative for India along with everybody else. So, it is something we have to start worrying about. We have so far put that on the back burner assuming something favourable would come around, but it is looking things are looking uncertain and that is never good for global economies and certainly not good for India although, again as I said, India is probably one of the less impacted but again it will have an impact. ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
Business Standard
an hour ago
- Business Standard
Barometers edge lower in early trade; VIX jumps 1.33%
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