Post ‘Liberation Day’ Outlook Changes!

By Daniel Morgan, Synovus Trust Senior Portfolio Manager
Synovus Trust Company, N.A.

• Benchmarks off Highs: Both the Dow Jones and S&P 500 Index had corrected about 17%-18% from previous mid-February Highs. The S&P 500 Index appears to be caught in a trading range between 5,000-5,500.

• 10-Year UST Yields Down: The 10-year UST yield has come down 75-50 basis points (BPS) since the middle of January, yielding between 4.00%-4.50%.

• GDP Forecast Muted: Economists’ gross domestic product (GDP) estimates had already fallen from above 2.0% to closer to 1.5% growth “Pre-Liberation Day.” Now estimates have been adjusted to around 0.5%-0.8% over the next several quarters.

• Inflation Scare: Economists are warning that the tariffs could add an additional 2.0%-2.5% points to inflation, bringing the reading closer to 5%.

• More Fed Cuts: Fed Funds futures are now pricing in four-five cuts in the FFUNDS rate this year, compared to just one-two cuts “Pre-Liberation Day.”

• Earnings Estimates Reduced: Corporate earnings estimates for 2025 and 2026 have not been fully adjusted to consider the increase in costs/lower margins associated with the tariffs. The S&P 500 2025 earnings forecast has been reduced to $257 (6% growth) and 2026 EPS moves to $281 (9% growth) in the best-case scenario.   

• Final Innings of Stock Market Expansion: The last two major Bull markets – which lasted from June of 1949 to February 1966 (16.7 years) and August 1982 to March 2000 (17.6 years) – combined for an average duration of 17.2 years. This current Bull Market that began in March of 2009 turned 16 years this March. Read on for more context.

I thought that it would be an interesting exercise to review how the expectations for economic growth, interest rates and stock market performance for FY2025 have changed since the announcement of the Trump administration’s tariffs. Above is an overview of the evolving expectations of both analysts and economists as they attempt to derive a clearer picture of the direct impact on the economy/markets if the tariffs were fully implemented.