Welcome to Thoughts on the Market.
I'm Mike Wilson, Morgan Stanley CIO and Chief U.S. Equity Strategist.
Today on the podcast I'll be discussing equity market reactions to the tariffs and what to expect from here.
It's Tuesday, April 8th at 11.30 a.m. in New York, so let's get after it.
From our perspective last week's Liberation Day was more like the cherry on top for a market
that had been dealing with multiple headwinds to growth all year rather than the beginning.
While the magnitude of the tariffs turned out to be worse than our public policy team's base case expectations,
the price reaction appears capitulatory to us given
that many stocks were already down 30 to 40 percent before the announcement on Wednesday.
As discussed in last week's podcast,
our 5500 first half support level on the S&P 500 quickly gave way given this worse than expected outcome for tariffs.
The price action
since then has forced us to consider new technical support levels which could be as low as the 200 week moving average and that would be 4700 on the S&P 500.
I think it's worth highlighting
that cyclical stocks started underperforming in April of last year and are now down more than 40 percent relative to defensive stocks.
In other words,
markets have been telling us for almost a year that growth was going to slow and
since January it's been telling us it's going to slow significantly.
In not prior to them.
This fits very nicely with our long-standing view