Trade anxiety will likely cap stock upside ahead of April 2 deadline - Barclays

Investing.com - Worries around the impact of President Donald Trump’s tariff plans will likely cap a recent bounce in stocks from oversold levels, according to analysts at Barclays.

Trump’s levies, which have been accompanied by threats of escalation and last-minute delays, have fueled a murky economic outlook, with economists flagging the potential for a refueling in inflationary pressures that could weigh on growth.

These fears contributed to stock market declines that briefly pulled the benchmark S&P 500 down into correction territory -- generally defined as a 10% or more fall from a recent peak.

Equities have shown signs of steadying this week as the rash of selling cools. The S&P 500 is on track for a 0.4% advance week to date, breaking a four-week losing streak, while the blue-chip Dow Jones Industrial Average is on pace for a 1.1% gain this week, marking its best weekly performance since late January.

Still, the Nasdaq Composite is off about 0.4% in the period, heading for its fifth consecutive losing week and its longest stretch of weekly losses since May 2022.

"Equities attempted to rebound this week, as depressed technicals brought in dip buyers, while U.S. data surprises stabilized," the analysts at Barclays led by Emmanuel Cau said in a note to clients on Friday.

The Federal Reserve also gave markets fleeting relief after the central bank kept interest rates unchanged as widely expected. However, the Fed raised its inflation forecast, cut its growth outlook for 2025, and signaled a wait-and-see approach to further monetary policy decisions due to tariff-driven uncertainty.

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Cau flagged that anxiety over an upcoming April 2 tariff deadline will likely limit any further upside in stocks. The Trump administration has said it intends to allow sweeping reciprocal duties to take effect on that date.

"With Trump dubbing the [...] deadline as a ’liberation day’, it is hard to ignore the downside risks, especially if a worst case scenario of 25% blanket tariffs materializes," Cau wrote.

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