Despite ongoing trade tensions between the U.S. and China, expert quotes the prevailing consensus that is anticipating minimal impact on future economic growth and corporate earnings.
What Happened: This comes after the U.S. and China agreed to hold high-level trade talks in Switzerland this weekend, their first major meeting since President Donald Trump initiated the trade war. The meeting comes amid growing U.S. market concerns over tariff impacts.
According to a recent analysis shared by market strategist Bob Elliott, the current market sentiment is discounting the potential effect of the existing trade policies.
Elliott highlighted that equity analysts and economists appear confident that the “admin’s policies” will not impede earnings growth in the coming years, with earnings projections for 2025 mirroring those of 2024 and even accelerating into 2026.
He underscores the relatively high 12-month forward earnings estimates, which remain considerably above current-year figures, suggesting a lack of widespread concern about long-term repercussions.
While the economic growth forecasts for 2025 have seen some downward revisions, the implied growth for the remainder of the year remains robust. Household consumption growth estimates also remain strong, mirroring the growth seen in the first quarter, as highlighted by Elliott in a series of posts.
Why It Matters: Adding a layer of cautious perspective, Marko Kolanovic, former Chief Strategist at JP Morgan, also commented on the news of potential U.S.-China negotiations.
In a social media post, Kolanovic warned against premature optimism concerning the nature of other geopolitical conflicts. He suggested that the initial contact between the two economic powerhouses should not be interpreted as an end to the trade war, highlighting the potentially lengthy and complex nature of such negotiations.
Price Action: After Tuesday, the S&P 500 index was out of the correction zone, just down 8.79% from its record high of 6,147.43 points, scaled on Feb. 19. Dow Jones was 9.42% lower than its 52-week high of 45,073.63 points and Nasdaq 100 was 10.94% lower than its previous high of 22,222.61 points.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, fell on Tuesday. The SPY was down 0.84% to $558.80, while the QQQ declined 0.93% to $481.41, according to Benzinga Pro data.
On Wednesday, the futures of Dow Jones, S&P 500, and Nasdaq 100 were trading higher.
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