JPMorgan has adopted a more bearish view of U.S. stocks because of a less optimistic take on the U.S. economy caused by President Donald Trump’s new tariffs , which kicked into high gear Tuesday. Trump’s tariffs — including 25% duties on all Canadian and Mexican imports, alongside an additional 10% levy on Chinese goods — caused a broad risk-off move in equities during the first two trading days of March. The S & P 500 shed 1.22% on Tuesday after losing as much as 2% intraday. The blue-chip Dow Jones Industrial Average fell 1.55% after sliding as much as 1.95% at the session low, and the tech-heavy Nasdaq Composite ended 0.35% lower after briefly slumping 2.14%. With the trade war ramping up due to retaliatory measures from all three U.S. trading partners, JPMorgan traders are moving into the bearish camp. “Given this escalation, we enter another period of uncertainty since there does not appear to be a pathway to negotiation based upon Trump’s comments,” the bank’s traders wrote in a note Tuesday. “Given the lack of a potential end to this escalation, the expectation is that tariffs of these magnitude [will] drive both Canada and Mexico into a recession. Look for U.S. GDP growth expectations to crater and for earnings revisions to be materially lower, forcing a re-think of year-end forecasts. With this in mind, we are changing our view to Tactically Bearish.” JPMorgan stressed that a U.S. recession is not its base case scenario. However, mounting uncertainty and an accelerating trade war are likely to mean that stocks “will be challenged” in the future. Key economic data points due to be released this week will shed more light on the state of the economy, chiefly the February purchasing managers’ index on Wednesday and the February jobs report on Friday. But JPMorgan clarified that these may ultimately prove unimportant, since they are backward-looking. Still, stronger macroeconomic data, even for February, “would delay any calls for a U.S. recession,” the bank added. Hightower Advisors chief investment strategist Stephanie Link challenged JPMorgan’s call on CNBC’s ” Halftime Report ” on Tuesday. While tariffs may lead to consumers being more choosy, Link said the overall macroeconomic picture still looks positive, bolstered by lower interest rates, a steady job market and strong consumer savings. Link added that Tuesday’s market decline may actually contain a silver lining for investors. “Until today, we’ve had it being a tech sell-off for the most part,” she said. “Today, now you have a broadening out. You have the leaders actually correcting, and that’s okay, too. I think that’s where your opportunity is — in financials, in energy, especially in industrials because I’m not backing away from manufacturing and the renaissance that we are going to see here. The manufacturing industry will actually benefit from tariffs if [companies] bring the facilities here, which is what they’re going to do over the long term.”
