President Donald Trump’s trade war has entered a new, chaotic chapter that’s raised uncertainty for investors.
Markets are going through a fresh bout of volatility after the Supreme Court struck down the majority of Trump’s tariffs — a move that seems to have marked the start of a new, confusing chapter in the trade saga.
US stocks initially rose after the tariff ruling was announced on Friday, even as Trump threatened to impose a fresh 10% global tariff. Indexes tumbled on Monday, however, as traders reacted to Trump’s follow-up announcement that he would hike global tariffs to 15%, adding to the mayhem.
Uncertainty over tariffs has long hung over the market, and it’s unclear how the new changes to tariffs will play out, particularly since it’s unclear how the fight over tariff refunds might end, according to Art Hogan, the chief market strategist at B. Riley Wealth Management.
“I just don’t think we’ve removed much of the uncertainty around tariffs by the Supreme Court ruling and quick pivot to Plan B,” Hogan told Business Insider. “I think that remains a headwind.”
Here’s how market pros think investors should position as the trade war takes its latest turn.
1. Maintain focus on AI
ANDREW CABALLERO-REYNOLDS / AFP via Getty Images
The tariffs story is largely a distraction from the market’s overarching focus on AI, according to Peter Berezin, the chief market strategist at BCA Research.
“I think the tariffs have become a bit of a sideshow at this point,” Berezin said. “I think it’s really just an AI story at this point for the market.”
Berezin said Trump is unlikely to raise tariffs beyond what he announced on Saturday. The president also looks like he’s laser-focused on his affordability push ahead of he midterm elections.
Furthermore, Trump likely knows that tariffs are inflationary and is looking to avoid that, as much as members of his team have downplayed price increases from tariffs, Berezin said. He pointed to a recent Financial Times report that Trump was planning to roll back some tariffs on steel and aluminum goods, which the White House later denied.
2. Focus on underperforming sectors
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Hogan said he thinks the recent tariff ruling doesn’t change the status quo in markets. Even with Trump’s 15% global tariff, the US’s new trade policy doesn’t look like it will change the investing landscape much from before, he said.
Some nations, like China and Brazil, were facing much larger tariffs prior to the Supreme Court ruling, and have come out as “winners” under the new tariff scheme, Berezin said, though he didn’t believe it changed the investing outlook from a sectoral perspective.
Hogan advised investors to stick to sectors that have recently outperformed after lagging the broader market for several years, including materials, industrials, and energy stocks. Those areas have made up the best-performing sectors of the S&P 500 so far this year.
Best-performing sectors of the S&P 500, year-to-date
- Energy: +22%
- Materials: +16%
- Industrials: +14%
- Consumer staples: +13%
- Utilities: +8%
3. Look into precious metals, commodities
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Precious metals and commodities also look like they could become winners from the new trade chaos, according to David Morrison, a senior market strategist at Trade Nation. That’s because investors flock to hard assets and other safe havens when they see “tariff-driven market stress,” he told Business Insider.
Despite enduring a historic sell-off in late January, precious metals and commodities have also posted strong gains so far this year.
Year-to-date performance:
4. Don’t chase the bounce in consumer importers
Associated Press
Hogan pointed to Friday’s short-lived pop in shares of consumer-facing companies that are major importers of foreign goods, such as furniture and apparel retailers.
Some investors may be feeling optimistic about corporate stimulus if the US refunds tariff payments. But refunds are uncertain, and should they come, it’s likely that the government will drag out the process, Hogan said.
“I just don’t know how resilient that will be in the face of ongoing litigation about the government paying this back,” he added of the recent rebound in the consumer sector.
Jeff Buchbinder, the chief equity strategist at LPL Financial, added that the firm wouldn’t chase stock jumps in import-heavy consumer retailers.
“We would fade the stock market bounce in tariff losers,” Buchbinder wrote. “Among tariff losers, our preference would be to play homebuilders, industrials, and technology hardware/semiconductors over apparel retailers and automakers.”
