Wall Street Week Ahead: Shell-shocked markets brace for more tariff tumult

Tariff-stunned markets face another week of potential tariff turmoil, with fallout from President Donald Trump’s sweeping import levies keeping investors on edge after the worst week for U.S. stocks since the onset of the coronavirus crisis five years ago.

Investors will look for signs the stock market may be close to at least a short-term bottom after Trump’s tariffs rocked global asset prices this week. The benchmark S&P 500 lodged its biggest weekly drop since March 2020 and the Nasdaq Composite on Friday ended down more than 20% from its December record high, confirming the tech heavy index is in a bear market. The Dow Jones Industrial Average finished the week down well over 10% from its December record high, marking a correction for the blue-chip index.

More volatility could be in store ahead of the April 9 deadline Trump set for his reciprocal global tariffs to take effect, after his Wednesday announcement of the levies sent markets into a tailspin, raising fears of a global recession.

“The playbook on this is very, very unclear for everybody,” said Jeffrey Palma, head of multi-asset solutions at Cohen & Steers. “There is all the questions about tariffs, retaliatory tariffs, where this ends and where it shakes out.”

With the steep slide at the end of the week, the S&P 500 was down over 17% from its February 19 all-time closing high. In the two days following Trump’s tariff announcement, S&P 500 companies lost about $5 trillion in market value, the largest amount ever in a two-day stretch, according to LSEG data.

“The markets could be their own worst enemy,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management. “This kind of drawdown … could shake confidence and it could actually lead to weaker economic activity.” Trump’s tariffs would amount to the highest trade barriers in more than a century, including a 10% baseline tariff on all imports and higher targeted duties on dozens of countries. The trade battle escalated on Friday when China hit back with additional tariffs of 34% on U.S. goods.

Investors downgraded their economic and earnings forecasts, with JPMorgan analysts raising the risk of a global recession this year to 60% from 40% before.

Some investors held out hope that Trump would negotiate deals in coming days with some countries that would roll back some of the tariffs. Others were dubious that Trump would make any concessions.

Despite Trump’s opportunity to pivot, “it is not lost on us that the window is shrinking and some damage to consumer and business confidence may have been done already regardless of the negotiated ending point to follow,” Citi strategist Scott Chronert said in a note on Friday.

One sign of gloom: The Cboe Volatility Index, an options-based measure of investor anxiety, registered its highest closing level since April 2020.

Bearish sentiment in the American Association of Individual Investors survey reached 61.9%, its highest reading since 2009 during the financial crisis.

With tariffs clouding the outlook, investors are wary of dour financial forecasts as U.S. companies kick off quarterly reports in earnest in the coming week. S&P 500 earnings are expected to have climbed 7.8% in the first quarter from the year ago period, according to LSEG IBES.

Companies set to report next week include major banks JPMorgan and Wells Fargo due on April 11.

“We see a lot of uncertainty in the earnings outlook at the moment,” said RBC Capital Markets strategists in a Friday note, in which they cut their 2025 earnings forecast for the S&P 500.

The market selloff and increasing pessimism could mean the bar is lower for news that would buoy stocks, said Keith Lerner, co-chief investment officer with Truist Advisory Services.

“If you had anything that was even remotely positive right now, you could see a short-term spark because people are braced for the negative outcome,” Lerner said.

Also in the coming week, the monthly consumer price index report on Thursday could help set a baseline for U.S. inflation ahead of the impact from tariffs, which are widely expected to add to pricing pressures.

Investors have been factoring in more Federal Reserve interest rate cuts this year in the wake of the tariff announcement, with Fed fund futures accounting for 100 basis points of easing this year, according to LSEG data.

Fed Chair Jerome Powell said on Friday that the tariffs are “larger than expected” and the economic fallout, including higher inflation and slower growth, likely will be as well.

Palma, of Cohen & Steers, said it was critical for markets to show some stability in the coming days.

“We’ve had two really, really big days in terms of sharp market moves,” Palma said. “What we really don’t want to see is that starts to create some vicious cycle that itself destabilizes the financial system.”