President Donald Trump's tariff policies have had a significant impact on the U.S. stock market, creating volatility and uncertainty for investors.
Last week, President Trump announced new tariffs on goods from Mexico and Canada, only to delay their implementation shortly thereafter. This led to significant market volatility, akin to a rollercoaster ride. However, some market participants view the uncertainty and fluctuations caused by trade concerns as potential buying opportunities. They anticipate that economic growth will dominate discussions in 2025, further driving stock market gains.
Investor Sentiment
In interviews with Market Insider, investors and economists expressed optimism about the stock market's trajectory, citing economic growth and ongoing catalysts like the AI boom. Many are skeptical about whether Trump will enforce tariffs as stringently as he initially indicated.
Clark Bellin, Chief Investment Officer at Bellwether Wealth, predicts a strong close for the stock market this year. He estimates a market return of 9% to 12% in 2025, primarily due to robust U.S. economic performance. The job market remains strong, with the unemployment rate near historic lows, and the Atlanta Fed's latest GDPNow forecast suggests a potential GDP growth rate of 2.9% for the current quarter. Although inflation rose to 2.9% year-over-year in December, it remains relatively moderate.
Bellin commented, “Inflation hasn’t surged and hasn’t dropped as much as people hoped, but the Fed’s cautious optimism and its goal of achieving a soft landing for the economy are positive signs.” He also noted that his firm reduced some exposure to sectors most impacted by potential tariffs to retain “dry powder” for future opportunities.
José Torres, a senior economist at Interactive Brokers, believes that the U.S. stock market could rise another 10% by 2025, primarily driven by Trump’s growth-oriented policies. He remarked that every market sell-off triggered by Trump’s political maneuvers could present buying opportunities for investors.
“We expect the stock market to continue rising,” Torres stated, highlighting Trump’s plans for tax cuts, deregulation, and boosting domestic manufacturing. He emphasized that concerns about tariffs should not undermine the positive momentum that could emerge this year.
Goldman Sachs estimates that Trump’s proposed tax cuts could increase S&P 500 earnings by as much as 20% over the next two years. Meanwhile, Morgan Stanley predicted last year that the push for manufacturing to return to the U.S. could add up to $10 trillion in value to the economy.
Torres added, “I see this as a great buying opportunity,” referring to last week’s market fluctuations.
Mark Malek, Chief Investment Officer at Siebert Financial, believes that the ongoing AI boom offers additional upside for the stock market. Major tech companies are ramping up investments in AI this year. For instance, Alphabet plans to invest $75 billion in capital expenditures by 2025, while Meta has committed up to $65 billion, and Microsoft has allocated $80 billion for fiscal 2025.
Malek stated, “I believe the substantial gains in tech stocks this year will continue to support the market, following their leading performance since 2023.” He added, “If we ignore all the noise from last week, you’ll see these companies performing exceptionally well.”
Investors have voiced concerns that Trump’s tariffs could increase inflation and keep interest rates high for an extended period, both of which could pressure the overall market. However, Bellin, Torres, and Malek largely dismissed inflation worries, believing that Trump is unlikely to implement tariffs as harshly as originally intended.
Trump had previously suggested imposing a 25% tariff on goods from Mexico and Canada but later postponed the plan by a month.
Malek speculated, “I think the President won’t really implement these measures. Tariffs might just be a tool for him to define his trade policy.” He questioned the rationale behind taking actions that could harm the market and the U.S. economy.
“They know they might not want to impose these tariffs,” Bellin added, “They’re likely seeking some negotiation leverage elsewhere.”
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