It’s been a challenging few days.
There’s been a mountain of news about the direction of global trade policy, which has been followed by a tsunami of research and insights intended to help investors make sense of it all.
I’ve spent a ton of time sifting through much of it, and I’ve concluded: It is impossible to know what will happen next.
While everyone agrees that the announced tariffs are negative at least in the near-term, the range of potential outcomes is very wide and impossible to define precisely. Not only are the indirect effects hard to capture, the uncertainty is heightened by the possibility that at least some of the tariffs are short-lived or negotiated lower.
Consequently, I’d caution against listening to folks who have a high degree of confidence in the particular outcome they’re touting. There are just too many unknowns to be able to model a clean forecast.
A couple of analysts I follow had some particularly insightful commentary on the murky state of things.
“There is no tariff playbook,” BofA’s Savita Subramanian wrote on Thursday. “Known unknowns are plentiful.” From her note:
Investors looking for historical parallels are faced with scant observations from incomparable eras (e.g., 1930s Smoot Hawley ended badly). Import/export exposure by company is difficult to estimate and not regularly disclosed. Full supply chains are hard to figure out. Secondary impacts are even hazier: prolonged negotiations could stall activity spiraling into a recession. Calls to boycott U.S. goods could ramp further. But pricing power and currency moves can mollify tariff impacts. Ex-U.S. multinationals can avoid tariffs (and maybe enjoy lower corporate tax rates) by expanding U.S. footprint. Our constructive equity outlook relies on at least partial resolution from which corporates can plan and grow by early 2H25, as capacity buildouts are multi-quarter phenomena.
Among the many challenges in analyzing the impact on the stock market is the fact that regulations don’t require publicly-traded companies to disclose many details about their overseas exposure. This is something I’ve mentioned in past discussions about S&P 500 revenues generated outside of the U.S.
To Subramanian’s point about boycotts, earlier this week Goldman Sachs economists also highlighted the challenges in estimating the magnitude of this second order effect.
Subramanian estimates that the impact of tariffs could drag S&P 500 earnings per share (EPS) by 5% to 32%. Yes, that’s a wide range. And even she acknowledges that it’s derived from an “oversimplified scenario analysis.”
On Bloomberg Radio on Friday, Renaissance Macro’s Neil Dutta addressed the shock to GDP that economists have been estimating as a result of the announced tariffs. He too cautioned: “These calculations understate the hit to some extent, because you’re just looking at direct costs. You’re not including, ‘What are the ramifications to corporate confidence? Household confidence?’ The spillover and knock-on effects. I think that’s why I think it can be even worse.”
In terms of modeling how the ongoing trade war will unfold, Dutta added: “We’re all just guessing at this point.”
Oaktree Capital’s Howard Marks, also speaking to Bloomberg on Friday, said: “The world economy and the world order beyond the economy — meaning geopolitics and international relationships — has been shook up like a snow globe by the events of the last days, and nobody knows what it’s going to look like.”
“Today, whatever your forecast may be, you have to say the probability that I’m right is lower than ever,” Marks added. “Because the probability that we know what the future is going to look like is lower than ever.”
While uncertainty and market volatility may be elevated in the near term, experts generally agree that stocks continue to be attractive for long-term investors. It’s just that the near future has become very difficult to predict.
It’s times like these where the best move is to stick to your financial plan, which hopefully takes into consideration periods of high volatility and uncertainty.
Watch earnings season 👀
If there’s any good news, the first quarter just ended. This means we’ll soon be in earnings season, when companies will give more color on what they see and where they expect things to head.
This could be productive, because so far we haven’t heard much about how tariffs may impact earnings. Here’s what RBC’s Lori Calvasina had to say in her research note on Wednesday:
We’ve been reading earnings call and conference transcripts closely since November across market capitalizations, sectors, and industries and feel fairly confident in saying that U.S. public companies have been very reluctant to discuss tariff impacts (outside of China) until specific details have been provided by the administration, and even then, many still have not given sell-side analysts a lot of specifics to start factoring into their models. The incremental information provided Wednesday (we hope) will enable sell-side analysts to push companies a bit harder to get the conversation going about these policies. This is important, because for U.S. equities to put in a durable bottom, EPS forecasts need to be adjusted which in turn will give investors confidence to assess valuations and make decisions about when opportunity has been unlocked in certain corners of the U.S. equity market.
“Like most analysts and strategists, we’ll be digesting the implications of the newly announced reciprocal tariffs in the coming days,” Calvasina wrote.
All eyes and ears will be on Corporate America in the coming weeks as earnings season picks up.
Will we get more clarity? Or will we learn they have no clue where things are headed either?
As always, keep your stock market seat belts fastened. Investing in the stock market is an unpleasant process.
More insights from Sam Ro:
**
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
