Key Points
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“Liberation Day” tariffs are set to go into effect on Wednesday.
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Wall Street is panicking ahead of these tariffs.
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A Goldman Sachs report that showed higher recession risk sent the market down further.
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The stock market has declined sharply as it opened as President Donald Trump’s “Liberation Day” approaches closer. On Wednesday, reciprocal tariffs against countries worldwide will go into effect, and many of these countries are expected to retaliate back. On Tuesday, further tariffs will go into effect on automotive imports. These tariffs will then expand next month to also include automotive parts.
The stock market is also reacting negatively to the S&P 500’s target being cut and recession risks being revised up. Goldman Sachs’ equity strategists team led by David Kostin cut their target for the S&P 500 for the next three months to a 5% fall. Previously, the S&P 500 was expected to remain flat, but the current target of 5,300 implies around a 13.7% plunge from the S&P 500’s peak in just a few months.
Here’s a market update as of 10:00 A.M (ET) today.
- The S&P 500 is down 84.35 points, or 1.51%.
- The Nasdaq Composite is down 460.2 points, or 2.66%.
- Dow Jones Industrial Average is down 181.9 points, or 0.44%.
U.S. Recession Risks Revised Higher
Recession risks were thought to be behind us as the economy went through two consecutive quarters of decline in 2022 and then recovered strongly with a solid labor market. GDP growth is now expected to decline in Q1 by 1.8% (annualized), according to the Atlanta Fed, and with the labor market weakening, these fears have returned.
The Goldman economics team led by Jan Hatzius has made some bearish adjustments to what they expect regarding macro figures. Goldman’s year-end PCE inflation forecast was hiked 0.5% to 3.5% as they expect tariffs to increase from 10% to 15%. The GDP growth forecast was also lowered full-year 2025 GDP growth forecast by 0.5% to just 1%. On an annual average basis, their GDP forecast was cut by 0.4% to 1.5%.
In turn, the GDP recession chance shot up to 35% from 20%.
Goldman Sachs’ EPS forecast also doesn’t look very promising for the market. It expects the S&P 500’s EPS to increase by just 3% this year and 6% next year. Most analysts have placed that number at around 9-14%.
In essence, Goldman Sachs sees some “stagflation” hitting the economy. This is something that analysts have been fearing, as tariffs would increase inflation and would prevent the Federal Reserve from cutting interest rates as needed.
Macro News Today
The Chicago PMI came in at 47.6 vs. the forecast of 45. This is a metric that tracks the health of the manufacturing sector in the Chicago region. 47.6 is much hotter than expected, but anything below 50 means a contraction.
Other Assets
- Gold is up 0.8% today and has broken above the $3,100 resistance line.
- Crude Oil Futures are up 0.55%.
- Natural Gas futures are also up over 2%.
- Bitcoin is down 0.6% due to risk-off sentiment.
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