Stock Market Rally Undeterred by Trump Policy Uncertainty

Despite concerns surrounding potential policy changes, the stock market rally has continued in 2025, with the S&P 500 hovering near its record high. However, analysts are expressing caution, as the positive news around Trump's policies may already be priced in, leaving room for disappointment.

Policy Disruptions and Tariffs Weigh on Market

Analysts argue that the potential disruptions from Trump's policies, such as tariff measures, have not been fully factored into market valuations. The initial tariff deadline for Mexico and Canada caused brief market volatility, but the subsequent extension eased fears. However, the looming question of whether tariffs will be enacted remains a concern.

Market Consensus Views Tariffs as Negotiating Tactics

Many strategists believe the Mexico and Canada tariffs are primarily negotiating tactics rather than actual policies to be implemented. However, the impending deadline for negotiations and the possibility of additional tariffs add uncertainty to the market outlook.

Earnings Growth Supports Market Rally

Despite the policy uncertainty, strong earnings growth has been a key driver of the stock market rally. However, analysts caution that any threat to earnings growth, such as the implementation of tariffs, could pose a risk to the rally.

Market Volatility Expected

Analysts anticipate potential market pullbacks of 5-10% if tariffs or other policy uncertainties materialize. While this does not indicate a recession, it could lead to a consolidation and adjustment of lofty market expectations.

Earnings Performance Crucial for Sustained Valuations

Analysts emphasize the importance of sustained earnings performance in the coming quarters to justify the current valuations. Continued strength in earnings will bolster investor confidence and support the market rally.