Next Week’s Market Forecast

Another week of fear and anxiety awaits equities investors. Markets were well down in Europe, Asia and the US. The Dow Jones is down 3%, S&P down 2.69% and the NASDAQ down 2.36%. The largest loss is in the Russell 2000, down 4.7%.

The big events?  Reciprocal Tariffs on Wednesday, FED cuts, and European retaliatory escalation of tariffs.

However, just now the markets have reversed and are rocketing back upward. Trump just announced he is doubling down on reciprocal US import tariffs, in effect on Monday.  After rising fast, they’ve collapsed again. However, markets are in tumult and could easily collapse again. The US debt issues and trade deficit aren’t going away.

Today, President Trump, while under tremendous pressure to back down, has strongly reaffirmed his position on tariffs:

On Monday morning, Trump wrote: “Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long time abused USA is bringing in Billions of Dollars a week from the abusing countries on Tariffs that are already in place.” A couple of hours later, Trump posted: “The United States has a chance to do something that should have been done DECADES AGO.”

Steep drops unearth more concern of a stock market crash.

As predicted, President Trump’s tariffs hit the markets hard last week, with some big drops for the NASDAQ, DOW, and S&P as the S&P lost (10%) or $5 Trillion in value, creating substantial embarrassment for almost all hedge funds and analysts. Only Warren Buffet is smiling, due to his big cash pile which I told you about long ago.

Added tariffs take effect on this Wednesday.  Monday, this morning, investors await more tariff retaliation and increasing obsession about them.  The media are hoping a furor will somehow prevent them, but the rebellion would be very damaging given the US debt situation and a slowing economy.

New reports this morning by the CBO tell a frightening story of the US debt which they forecast will surge to 156% of GDP. That is 50 percentage points higher than the current record, set in 1946 at the end of the war.  The debt story of course would justify the tariffs and DOGE cutbacks, yet shrinking government revenues suggest emergency conditions. The specter of a global meltdown is growing as world leaders talk about further tariffs on the US. They are called Trump to negotiate but Trump seems to think the offers are too weak and too late.

The key is Trump’s mention of non-tariff barriers which are the hidden problem other nations don’t want to amend. These are things investors know nothing about. Hedge funds invested outside the US are getting a rude awakening and suffering massive losses.

Key Events to Watch This Week

Stock futures tonight (Sunday) are deep in the red.  Minutes after trading opened on Sunday evening, S&P 500 futures (ES00) fell 5.3%, at 4,863, while the Nasdaq-100 (NQ00) slid 5.4% at 16,578 and the DJIA futures declined by 1,705 points, or 4.3%, at 36,831.  See the futures report below.

A Marketwatch report has analysts stating the market may be approaching its bottom, as indicated by elevated volatility indices and a high percentage of S&P 500 stocks trading below their 200-day moving averages.

IBD advises investors to closely monitor upcoming economic indicators, particularly the Consumer Price Index (CPI) and Producer Price Index (PPI) inflation data, to assess the tariffs’ impact on the economy. They suggest reviewing the this week’s earnings reports, particularly those of JPMorgan, Wells Fargo, and Delta Airlines. Delta’s report is likely a tough one given the sudden slide of the International travel market.  Carmax is up this week, and JPMorgan Chase, Wells Fargo, and BlackRock report earnings on Friday. Fed meeting minutes, consumer sentiment, wholesale inventories, and consumer credit data are due this week as well.

More of the 6 Month Decline Will Come into View

Be mindful of what I said about investor’s disregard of the impact of the tariffs. They will have a downward effect on the economy and that might not fully priced in either. Most of last week’s response was the anticipation of slowdowns in other countries. Some have suggested the US will be most hurt by the tariffs, but that’s likely not true. There’s a lot of denial and propaganda by politicians trying to wire the issue to their favor.

It’s other nations who will face lost sales in their primary customer market — the USA. They will have to lower their prices and absorb the losses. The US on the other hand should see a troubled 6 month period until US companies see their output and sales revenue climb. They will be picking up the slack opportunity from the import tariffs.

Futures Suggest Markets Heading Lower Still

Even Jim Cramer is talking downward, and comments that Europe’s retaliation may happen in the next 10 days.  Yet other analysts feel that investors are all sold off for now. The fear index (see below) is at its highest this year, and the uncertainty over them might be more harmful to index values this week than anything. The jobs market and a Saudi oil production announcement (Oil: $59 / barrel tonight and gasoline below $3.00) were two positives pushing prices the other way. Cheap energy is a big boost for US companies.

It’s wise for investors to review the new opportunity of the tariffs. The coming US company earnings will be astonishing, and very good for the country. Smart investors are moving forward, know that Trump will ease off a bit, but not enough to undermine what he’s trying to achieve. His resolute stance in the anti-tariff protestations, shows the US comeback is a certainty. Time to research the best sectors, companies and new opportunities and move on.

Trump Vs Powell Round 2 Coming

That event and J Powell’s dour comments may seem to force the bottom buy the dip opportunity many were looking for, but we’re likely not at bottom yet. The full scale of the countertariff announcements will come this week.

What’s being kept under wraps is the trade deficit and US national debt numbers. They are massive and worrying, which is why the Dem’s media outlets are putting the kibosh on US debt stories. Any mention of them, and interest payments default, makes Trump look responsible and reasonable.

Again Trump needs Powell to lower interest rates to ease the national debt problem, but Powell seems not obliged to help. And openly adversary relationship is brewing between the two most powerful people in the US, and Powell will likely be holding the weak cards.

Investor sentiment hit its year-to-date high last week, showing the pain of the US reindustralization transition.

Canada is the Canary in the Coal Mine

That’s the issue no one is discussing. Can Europe, Canada, Mexico, and China survive without US spending and imports? Canada in particular is on the verge of economic failure with a will go to the mat with Trump. Others say the same thing, but that will certainly ruin their economies. In the case of Canada, it could actually expose raw, long-time tensions within Canadian provinces to explode into a split of the country.

Wednesday’s Tariff Implementation did Hit Markets Hard

A few experts believe the tariffs have already been priced in, but as I said, it wasn’t so. It’s difficult for anyone to estimate how nations like Canada, UK, and Europe would react to last Wednesday’s tariff deadline. Most say they will fight endlessly and create a trade war. The realization of that when it sinks in with institutional and retail investors, will create a panic.

Trump has set the market wobbling every day with new comments, often contradicting he’s said previously and this more to come this week. A few analysts mention that a crash isn’t totally out of the picture.  The countertariffs and supply issues could be damaging, something a few political onlookers might wish for.

What happened last week was notable with Google and Palantir stock dropping almost 5% in one day. Will the indexes rebound by next Friday, or will panic set in and we’ll see the worst declines yet?

Sentiment Sours

“The US LEI fell again in February and continues to point to headwinds ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Consumers’ expectations of future business conditions turned more pessimistic.

As you’ll see below, consumer sentiment has soured yet there aren’t any numbers to support the dour outlook. Even wage growth fears are easing as the forecast is for a 3.9% rise, down just slightly. And in February 2025, US small business optimism fell as the NFIB Optimism Index slid 2.1 points to 100.7.

Chief Executive’s CEOs’ rating of current business conditions in the U.S. dropped a strong 20% from January (from 6.3 to 5 out of 10, on a scale where 1 is Poor and 10 is Excellent). That was the weakest rating since spring of 2020, when the pandemic shut down the economy. And CEOs’ forecast for one year from now fell 28 percent% —from 7/10 in January to 5/10 in March.

President Trump lauds the import tariffs as his key economic solution and speaks of the hundreds of billions in tax money the US government will enjoy. Yet, despite the obvious issues with it, last week he mentioned that “things will work out” and he would adjust the tariffs as needed. So far, the economic numbers look good given how bad it could have been. Next year, 2026, all this turbulence should be eased with the road ahead much clearer. The US should be fully on top of it in one year’s time.  For the next 6 months however, the markets will be volatile and rhetoric heated.

The reciprocal tariffs mean US costs will rise considerably since US production capability isn’t sufficient. The US is lacking many of the inputs industry needs. This is why he is waffling and will likely try to ease tariffs on those key inputs. Automobiles however, will likely not be part of that easing. He reiterated his tariff on auto imports last week.

O’Reilly Automotive Nasdaq (ORLY) has caught the fancy of many investors as you can see in the chart below. With US auto industry hungry for parts, it is ideally positioned. And the tariff situation for auto parts seems better with delays on them being tariffed. Inevitably, US-based companies such as O’Reilly seem destined to dominate.

Should you Buy or Sell?

And in this uncertain environment, investors would be wise to sell or hold, and focus on the opportunities in the US forming.  Experts believed the bottom was behind us, but the indexes just keep on falling. Yet, in the next few months, it might find its bottom.  The economic slowdown will reduce corporate profits and send consumer sentiment and spending sliding (it was up .4% in February). So, the worst is yet to come.

Despite a strong downslide in the last few days, some equities managed to make gains.

Canadian Tariffs the Key Talking Point

This past week the markets took a plunge due to the uncertainty, not because of weak earnings or market fundamentals. It’s all about President Trump and the multiple tariffs he’s imposing on Canada, China and Europe. If he should decide to doll out some breaks to Canada and Mexico, it still doesn’t dissipate the negative effects overall. His intent with tariffs is clear — he believes they will serve many positive economic benefits. He’s also speaking about individual big investments from Taiwan’s TSMC and South Korea’s Hyundai for instance which amount to an impressive hundreds of billions of dollars.

Those are important for investors as decision points about buying US stocks.

It would be unreasonable to think he can or would eliminate the tariffs and let these companies down. He’s set a course for the US economy, regardless of the pain, to support American manufacturing and create jobs in the USA. Countries such as France, UK, Germany, China, Japan, Mexico and Canada will all take a hit.

This means the NASDAQ, Dow Jones, S&P and Russell2000 may take a big drop again on Tuesday in anticipation of Wednesday’s event.  There will be comments and speeches of course, and they will catch the fancy of optimistic stock market experts, economists and retail investors who simply can’t fully be convinced this is happening. It’s a fantastic buy the dip opportunity to own US stocks which in one year will have grown substantially. Any forecast beyond 2025 is positive.

Kyle Bass of Hayman Capital, on Friday, said that these small corrections are actually good for economy and stock market, and will prevent a major damaging crash. A stock market crash has been deeply discounted despite the threats, yet we still haven’t see what these other nation’s retaliatory response will be. Many have said they will not back down. President Trump has warned he’s willing to add on futher tariffs and escalate the battle all the way.

Investors aren’t sure how to process everything that’s happening and many are selling off to avoid the risk. The rising price of gold tells us what the world believes. It hit a record of $3,038 at one point today.

I’ve been calling for this plunge for a little while, however many market experts including Tom Lee keep talking about a rally. Liz Sonders too, believes a sharp V-shaped recovery is just ahead and inflation isn’t a concern.  Well, consumer price inflation rate rose strongly again in February on a firm upward curve every month. With tariffs applied, these prices are about to take a big leap.

Consumers are negative, sentiment dropped last week and that likely will recede further in early April. We know their sentiment has a big impact on stock prices, including the overvalued AI bubble stocks.  It will take some powerful political events to make consumers believe all is well. As we know the US travel market is taking a beating, and foreign travel revenues will drop this summer travel season coming. That means many young Americans won’t have that needed summer job.

Let’s check back in on Monday on the live stock market today post.

Sectors to Watch

Consumer discretionaries, technology stocks, and industrials are seeing the most damage. China’s threatened action against Nvidia’s top chips sent its stock price down however, there is concern the microchips are in a bubble. This week’s retaliatory tariffs in response to Wednesday’s tariff hike by the US will hit industrials and tech even harder. Investors seem to know this.

Utilities was the only sector in the green, reflecting a recession scenario.

Investor Sentiment Survey

Below is AAII.org’s recent survey. Today’s investor survey might look very different.  I’m not sure how relevant the investor sentiment survey is. Too often, it’s media manipulated and not reflecting the opportunity that’s actually being offered.

Investors apparently feel more bearish and gloomy than last fall! And it appears they were wise!

60% of respondents expect a rate cut in September. The FED’s J Powell has been talking about the harm of continued high rates to the US economy and the FED governors are likely ready to drop it 25 basis points (IMHO).

See more on the 3 month, 6 month, and 5 year stock market outlooks, and the current stock market forecast.

Next week’s events from TradingView

Weekly forecast hunters are pursuing clues about the direction of the Dow Jones, S&P, and NASDAQ for specific stocks or ETF’s worth buying or those they should dump. The NASDAQ, S&P, Russell, and Dow Jones are all looking positive right now, and the stock market forecast is looking much brighter as the FED pulls back on its injury of the US economy.

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* Note: This post on next week’s stock prices is for informational and entertainment purposes and should not be regarded as investment advice for any market transactions. Please consult with your stocks and financial advisor for investment decisions.