The Trump tariff tone will determine share prices

Of course, this market nervousness and sell off is all Trump connected, with even the inflation reading not helped by the view that upcoming tariffs won’t be a plus for the USA’s fight against sticky inflation.

In case you missed it, CNBC summed it up earlier this week as forecasts for gold were pushed higher. This is what was reported: “Gold has gained 14% this year to break US$3,000 per ounce for the first time as geopolitical tensions and President Donald Trump’s trade war push some investors into safe-haven assets. The yellow metal has gained about 6% this month and was last trading at $3,024.8 per ounce.”

As safe-haven assets become popular, the riskier high growth tech stocks have been dumped. In the US, all seven stocks in the “Magnificent Seven” had bad weeks and they need some good news to turn around this negative market sentiment towards them.

While this is creating a ‘buy the dip’ opportunity, until there’s clarity on what the Trump tariffs will mean, buying now is a big gamble. With any other political leader (even Putin), you could marry their history and personality and make predictions about upcoming policy decisions. But not with Donald J. Trump.

That said, I do think his tariff policies will be influenced by the big-end-of-town CEOs, who would be talking to the Trump team. It’s why I think we’ll see stocks make a decent comeback later this year and it could start as early as next week, provided the tariffs outlined on April 2 aren’t worse than expected.

The importance of the tariff announcements on April 2 was shown earlier this week, when stocks rose on a change of tone from the US President.

CNBC explained this market rise with the following: “Trump on Tuesday said that these tariffs will likely be more ‘lenient than reciprocal’, reflecting a softened stance that added onto reports from earlier this week that the duties could be narrower in scope and that sector-specific tariffs are expected to be delayed.”

This week, Barclays looked at the current state of tariffs and they’re already on the rise. “We think the direction of travel is clear: average tariff rates are increasing, likely to levels not seen since before World War II,” the firm’s Michael McLean wrote Wednesday.

“At the end of 2024, the US weighted average tariff rate was 2.5%. After the tariffs that Trump has implemented so far, the average tariff rate has increased more than 3 times to over 8%,” he continued. “We assume once Trump is finished, it could be as high as 15%.”

April 2 is a Wednesday in the States, but our market won’t get to react until Thursday. If the Trump tariff tone is more conciliatory, then the expected retaliation reaction will be toned down as well and could be a plus for stock prices.

Our market is expected to open down around 80 points and I’m expecting negativity to prevail until Thursday, unless Mr Trump talks up his less aggressive stance on tariffs. While a speculator will be a buyer of next week’s dip, a cautious investor will wait and see what the tariff story is before being a buyer.

If that story leads to a rising market, the rises could be sustained for some time as the Nasdaq is down 13.6% since February 19 when Trump tariff talk toughened up!

As a Scottish guy once said to me: “Watch your tone, pal, watch your tone!” And I’ll be watching the Trump tone on Thursday, along with Wall Street.

To the local story and the S&P/ASX 200 snuck up 0.64% (or 50.80 points) to finish at 7982.00, despite tariff concerns unsettling global stock markets. However, the positivity of the market could be rattled by what President Trump reveals next week about tariffs.

Here’s a look at the stars and strugglers that saw 5% or more rises or falls for their stock prices:

To the seven stars…

1. The Reject Shop (TRS) got ‘unrejected’, rising 108% to $6.61 on a takeover offer and acceptance!
2. Ramelius Resources (RMS) sparkled, thanks to Trump tariff fears, up 13.3% to $2.47.
3. Regis Resources (RRL) glistened too, up 6.85% to $3.90.
4. West African Resources (WAF) glittered up 9.38% to $2.39.
5. Healius (HLS) is on the mend, up 7.99% to $1.46.
6. Gold Road Resources (GOR) was another ‘glitterer’, rising 23.89% to $2.93.
7. Helia {(HLI) this is the old Genworth loan insurance company} surged 16.24% to $4.08 as loan refinancing picks up.

And the 10 strugglers…

1. Orora (ORA) packed it in, down 8.40% to $1.80.
2. LNW (Light & Wonder) missed the jackpot and was off 9.40% to $151.31.
3. John LYNG’s (JLG) disaster continues, down 5.63% to $2.18.
4. Paladin (PDN)was nuked again, 17.06% lower to $5.42.
5. Atomo Diagnostics (AT1) got it wrong again, down 10.53% to $0.017!
6. Next DC (NXT) copped a tech trashing, which Trump’s tariff talk breeds, down 10.70% to $11.69.
7. Another tech darling, Pro Medicus (PME), slumped 11.11% to $201.80.
8. Boss Energy (BOE) also got nuked, off 12.81% to $2.45.
9. Coronado Global Resources (CRN) went down the mine, losing 10.85% to $0.35.

10.The James Hardie (JHX) merger isn’t liked, down 8.92% to $38.68.

What I liked – seven things!

1. The headline CPI at 2.4% for the year to February.
2. The underlying inflation rate at 2.7%, which helps future rate cut hopes.
3. A one-year drop in petrol prices by 25 cents a litre.
4. Labor’s bulk billing incentives for GPs, which the Coalition agreed to support.
5. Our March Purchasing Managers Index improved for services (to 51.2 from 50.8 last month) and manufacturing (to 52.6 from 50.4), remembering that a number above 50 indicates expansion and a figure below is contraction.
6. On the US PMI, the composite measure lifted to 53.5 from 51.6 last month, with services outperforming but manufacturing slowing back into “contraction” (i.e. a reading below 50). That’s better news than the consumer confidence reading.
7. The overall Eurozone PMI index is positive at 50.4 (from 50.2 last month) and we need the EU and the USA, along with China, to keep global growth strong.

What I didn’t like – six things!

1. The Budget promises to spend, which could make the RBA wary about rate cuts!
2. Labor’s banning non-compete clauses that can lead to employees ‘stealing’ clients.
3. Trump’s car tariffs and what it could lead to retaliation-wise!
4. In the US, the Conference Board consumer confidence indextanked to 92.9 in March, from 100.1 last month, the lowest reading since July 2015 (outside of the pandemic). This is a Trump tariff related development.
5. The University of Michigan’s final read on consumer sentiment for March came in at 57, slightly below a Dow Jones estimate of 57.9, as inflation expectations reach multi-decade highs.
6. The Fed’s preferred inflation statistic, the core PCE, came in hotter-than-expected, rising 2.8% in February and reflecting a 0.4% increase for the month, increasing concerns about persistent inflation.

Two different Trump reactions

CNBC overnight reported the following about Canada’s and the EU’s reactions to Trump’s tariffs: “On Friday, Canadian Prime Minister Mark Carney told Trump that the Canadian government will implement retaliatory tariffs following the April 2 announcements. Bloomberg earlier reported that the European Union is identifying concessions it could make to Trump’s administration to reduce the reciprocal tariffs from the U.S. that are set to increase after April 2.”

Meanwhile, President Trump and Prime Minister Carney had a phone hook up on Friday. Both came out of it sounding conciliatory. With Donald, you can only live in hope.

This was from the CBA economics team:

“The trimmed mean gauge – a closely watched measure of core inflation which smooths out volatile items decelerated from an annual rate of 2.8% in January to a 2.7% pace in February, still slightly above the mid-point of the RBA’s target band. The annual rate of underlying inflation has been stuck between 2.7% and 2.9% for four consecutive months. Therefore, the muted core disinflation progress is likely to keep RBA policymakers on guard. “

But, the economists think “…such a reading will be enough to see the RBA cut in May, with the Board using the April 1 meeting as a potential opportunity to lay the groundwork for another reduction in rates. We expect the RBA to deliver further 25 basis point rate cuts in August and November for an end year cash rate of 3.35%.”

Labor back in front!