Equity markets are no longer reacting to tariff headlines as sharply as before. Despite President Trump’s latest tariff threats — including over 20 letters sent in July outlining potential new levies — the S&P 500 has held strong, reaching record highs. According to Goldman Sachs strategist David Kostin, earlier in the year, stocks with broad tariff exposure saw sharper movements. But recent data shows muted responses, with the index moving less than 1% on days packed with tariff announcements.

Investor sentiment is shifting. Many now believe actual tariff rates will settle lower than initial threats suggest. Economic indicators — consumer spending, inflation, and labor market data — show a smaller-than-expected impact from tariffs, boosting investor confidence.

GS projects a 5% gain for the S&P 500 over the next six months, and 10% in the coming year, driven by optimism around long-term earnings growth. Morgan Stanley’s Mike Wilson echoes this view, pointing to improving corporate operating leverage, lower wage costs, and AI-driven productivity.

While short-term risks remain — including a rising 10-year Treasury yield and potential inflation spikes — both strategists agree: markets are resilient, and dips present buying opportunities.

End Notes

Source: https://finance.yahoo.com/news/one-chart-shows-how-the-market-has-moved-on-from-tariffs–for-now-100023003.html