US Stocks Surge Amid Tariff Halt and Economic Uncertainty

US stocks experienced notable gains last week, propelled by President Trump's decision to pause tariffs. However, rising inflation expectations and geopolitical tensions remain concerning for investors. The market environment presents both opportunities and risks as companies navigate earnings amid trade policy uncertainty.

Date: 15-04-2025

AI Rating: 6

The recent report indicates several critical factors likely influencing stock prices in the near term. One of the most significant drivers of market movement came from President Trump's announcement to pause reciprocal tariffs for 90 days, particularly exempting technology products including semiconductors. This could lead to positive sentiment in the tech sector, which has already seen strong performances from key players like NVIDIA. Given the pivotal role of technology in the market, this development can be seen as a beneficial factor bolstering investor confidence, especially in the Technology Select Sector SPDR ETF (XLK).

**Earnings Outlook and Inflation Concerns**
Looking ahead, the earnings forecast for the S&P 500 indicates a 5.8% increase in earnings per share (EPS) alongside a 3.8% rise in revenue. This is a positive sign following the 14.1% earnings growth observed in the last quarter. However, as companies might have to adjust their guidance due to ongoing tariff-related uncertainties, the potential for maintaining these estimates could come under pressure.

Simultaneously, while inflation has shown signs of cooling, consumer sentiment has hit rock bottom, with expectations for inflation reaching their highest since 1981. This dichotomy could lead to volatility; if inflation pressures persist, it may influence Federal Reserve policy, with markets already pricing in potential rate cuts in the near future. A rate cut would typically be a positive development for equities.

**Market Valuation**
The stock market appears relatively undervalued, as the S&P 500 forward price-to-earnings (P/E) ratio has decreased to 18.01. This valuation metric suggests that stocks are appealing compared to historical averages, potentially attracting investment as earnings season progresses. However, the rapidly shifting trade policy poses risks that may undermine market rally sustainability.

Overall, the report outlines a mix of promising earnings forecasts tempered by inflation and geopolitical uncertainties. Even as sectors like technology may benefit short-term from tariff pauses, attention must be paid to macroeconomic factors and the possibility of revising earnings guidance as the fiscal landscape continues to change.

Stocks: NVDA XLF XLK XLI