Welcome to Thoughts on the Market.
I'm Mike Wilson, Morgan Stanley, CIO and Chief U.S. Equity Strategist.
Today on the podcast are views on tariffs and the implication for equity markets.
It's Monday, March 31st at 11.30 a.m. in New York, so let's get after it.
Over the past few weeks, tariffs have moved front and center for equity investors.
While the reciprocal tariff announcement expected on April 2nd should offer some incremental clarity on tariff rates and countries or products in scope,
we view it as a maximalist starting point ahead of bilateral negotiations as opposed to a clearing event.
This means policy uncertainty and growth risks are likely to persist for at least several more months,
even if it marks a short-term low for sentiment and stock prices.
In the baseline for April 2nd,
our policy strategists see the administration focusing on a continued ramp higher in the tariff rate on China,
while product-specific tariffs on Europe,
Mexico and Canada could see some de-escalation based on the USMCA signed during Trump's first term.
Additional tariffs on multiple Asia economies and products are also possible.
Timing is another consideration.
The administration has said it plans to announce some tariffs for implementation on April 2nd,
while others are to be implemented later, signaling a path for negotiations.
However, this is a low conviction view given the amount of latitude the president has on this issue.
We don't think this baseline scenario prevents upside progress at the index level,
as an off-ramp for Mexico and Canada would help to counter some of the risk for moderately higher China tariffs.