LIVE MARKETS-Tariff tumult still in the early stages

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TARIFF TUMULT STILL IN THE EARLY STAGES

After closing out the holiday shortened trading week at record highs for the S&P 500 .SPX and Nasdaq Composite .IXIC, stocks have gotten off to a sluggish start this week as fresh tariff announcements have moved to the front burner.

Scott Wren, senior global market strategist at the Wells Fargo Investment Institute in St. Louis, notes that Wednesday was the expiration date for the original 90-day pause of reciprocal tariffs numerous important U.S. trading partners.

But as of Monday, the pause was pushed back to August 1 in letters from President Trump to 14 countries, with Japan and South Korea subject to 25% tariffs by that date unless their products are made in the U.S.

According to Wren, the letters, deadline extension, and upcoming expiration on August 12 of the 90-day tariff pause with China "are just a big reminder that we are still in the early stages of hammering out what U.S. trade relationships with our largest global trade partners will be."

With Trump's tax-cut and spending bill now out of the way, Wren believes the next few weeks are likely to be marked by renewed "bouts of equity and bond market volatility," within a slowing economy that is just now starting to see price pressures from tariffs become visible in economic data.

Wren cautions that U.S. consumers have yet to witness the full effects of tariffs as the magnitude of implementation has been uneven and inconsistent, resulting in consumers buying goods that were inventoried by sellers prior to the application of tariffs in many cases.

When those inventories are emptied and replaced by goods that have been subject to levies, Wren expects to see goods inflation increase into the end of this year and in the early months of 2026, likely increasing market worries.

With the runway before the tariff impact growing shorter, Wren says the firm is still overweight tech .SPLRCT and communication services .SPLRCL, but the recent rally to record levels may give investors a chance to lighten those weights and reallocate to energy .SPNY, utilities .SPLRCU and financials .SPSY and they "continue to look at pullbacks as opportunities to buy into favored sectors."

(Chuck Mikolajczak)

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