Trump's Initial Six Months in Office and the Adverse Effects on Portfolios Revealed: 5 Key Points
In the midst of President Donald Trump's second term, the impact of his tariff and trade policies on the S&P 500 has been less severe than anticipated. Despite initial concerns that tariffs would negatively affect earnings growth, S&P 500 companies have shown surprising resilience.
- Market Volatility and Tariff Uncertainty
Early in 2025, Trump's plans to impose tariffs caused significant market volatility, with the S&P 500 index falling nearly 20% from its highs. However, as Trump backed down from some of his more extreme trade policy threats, investor confidence returned, and stock prices rebounded.
- Earnings Performance
By the end of the second quarter, aggregate earnings for S&P 500 companies rose by 11% year-over-year, far exceeding the consensus expectation of 4%. Moreover, 84% of companies reported earnings above Wall Street's estimates, and 58% increased their full-year guidance for 2025.
- Weakening US Dollar and Sector-Specific Tariffs
The steady weakening of the US dollar has also helped drive sales growth for S&P 500 companies, especially in international markets. Sector-specific tariffs have affected certain industries like aluminum, autos, and pharmaceuticals, but many companies have managed to maintain profit margins through cost adjustments and price increases.
- Recession Odds and Economic Outlook
President Trump's pullback from aggressive tariffs and deals with several countries lowered the odds of a recession down to 20%. However, an economic slowdown could still be in the cards, as the stock market has rallied back to record highs in the past three months.
- Tech Sector Concerns
For tech companies, a genuine concern is the tariffs that Trump may apply to imported semiconductors, which could erode tech gains if tariffs and trade uncertainty persist for an extended period.
Looking ahead, Glenmede's Chief of Investment Strategy & Research, Jason Pride, and Vice President of Investment Strategy, Michael Reynolds, suggest the path to greater trade policy certainty will be uneven. S&P 500 earnings for the second quarter are expected to show a 5.9% increase in year-over-year EPS.
Sources:
- CNBC
- Bloomberg
- Reuters
- The Wall Street Journal
- Yahoo Finance
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