Stocks took a sharp nosedive after President Donald Trump unveiled a series of significant tariffs, prompting concerns among economists that these measures could drive up prices and stifle economic growth.
In the wake of Trump’s late-Wednesday announcement, the S&P 500 saw a steep 10.5% decline over Thursday and Friday—marking the index’s worst two-day performance since March 2020 and its third-worst since the early 2000s.
The stock market has been under a cloud of uncertainty regarding the scale of potential tariffs ever since Trump’s return to the White House in January. Investors had been hoping that this week’s tariff announcement—referred to as “Liberation Day” by Trump—would finally provide the clarity businesses and investors have long sought.
However, Trump’s proposed “reciprocal” tariffs raised more questions than answers, leaving economists perplexed and intensifying confusion on Wall Street. The tariff rates announced were also higher than many analysts had expected.
“We must assume this is just the beginning of a negotiation and that these rates will not be permanent,” wrote analysts from Wedbush in a Thursday note. Bernard Yaros, lead U.S. economist at Oxford Economics, concurred, explaining that the staggered tariff deadlines—set for April 5 for a 10% universal tariff and April 9 for country-specific tariffs—indicate that there is room for negotiations between countries and the Trump administration.
As it stands, the uncertainty surrounding tariffs is expected to continue to weigh on the stock market while negotiations unfold. In the meantime, countries may retaliate, as China did on Friday, imposing their own tariffs in response.
“Given the high level of uncertainty, adopting a cautious strategy is the most prudent approach,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management. While he believes that the White House’s deregulation efforts, tax cut extensions, and potential reductions in tariff rates could eventually boost investor sentiment, he emphasized that it will take time for businesses and investors to regain confidence. “There is significant damage being done to business and investment confidence, and recovery will be slow.”
Jeff Buchbinder, Chief Equity Strategist for LPL Financial, added, “Stocks should stabilize once negotiations lead to meaningful reductions in tariff rates, assuming markets can be assured that retaliatory measures won’t lead to further increases.”
Is It Time to Buy the Dip?
Many analysts adhere to the long-held principle that “time in the market beats timing the market.”
“Investors should stay focused on their long-term goals,” said Simeon Hyman, Global Investment Strategist at ProShares. He noted that market pullbacks, which are a natural part of market cycles following years of growth, often present buying opportunities—particularly for high-quality companies with stable earnings.
Shawn Tuteja, head of custom basket and ETF volatility trading at Goldman Sachs, recommended using market relief rallies to reduce exposure and to consider adding positions in companies with strong fundamentals when prices dip.
However, some experts are advising caution before jumping in. Adam Turnquist, Chief Technical Strategist at LPL Financial, pointed out that market corrections typically bottom out when fewer than 10% of S&P 500 stocks are trading above their 20-day moving averages. As of Thursday’s close, around 30% of the index remained above this threshold.
Turnquist also highlighted a lack of strong institutional buying during Thursday’s sell-off, suggesting that the market could have further to fall, which it did on Friday. “Overall, the technical indicators continue to suggest caution when considering buying this dip,” he said.
As the situation unfolds, market participants remain in a wait-and-see mode, hoping that clarity on the tariff issue will emerge soon, providing a clearer path forward for both the economy and investors.
