Tariffs: What's Priced In?

Featured Quote: From Longview Tactical Asset Allocation

“Sentiment remains deeply bearish: Despite a sharp rally in the past 3 – 4 weeks, overall sentiment remains close to record lows (i.e. bearish). Our sentiment scoring system, for example, which aggregates four key sentiment indicators (including AAII retail sentiment & the equity advisory optimism indicator) is close to the lows it reached towards the end of the 2022 bear market, and is below its February 2016 & December 2018/January 2019 lows. That high level of bearishness has been echoed in various surveys and comments in the past 2 weeks: The April BAML FMS, for example, was “the 5th most bearish in past 25 years”; Mark Mobius, well known EM investor, retains “95% of my money…[is]…in cash” – see quote in publication; and so on.”

Source: Longview Tactical Equity Asset Allocation No. 256, 1st May 2025:

“‘Bearishness Abounds’, a.k.a. Stay Tactically LONG –> Trim Position Size ”

Featured Chart: Longview Sentiment Scoring System

FIG 1: Longview sentiment indicator vs. S&P500

Trump: Is There a Plan? Or Is It Just Chaos?

On one level it feels like chaos: After months of build-up, tariffs were announced by the Trump Administration on Liberation Day (2^nd April). Then Canada and China retaliated (3^rd & 4^th April); America responded by adding more tariffs onto China (an extra 50%, 8^th April); China responds the next day (an extra ‘50% tariffs’ on America); while the EU also confirms retaliation that day. Then later (same day/9^th April) Trump posts on Truth Social about the 90-day pause: “differential tariffs on trade surplus countries announced April 2 will be paused for 90 days”.

Now, after several more announcements and sector specific tariff changes/exemptions (like autos, semiconductors, Apple related smartphones and so on), it appears that China and the US are edging closer to starting negotiations (see Bloomberg article: “China Says It’s Assessing US Talks, Hinting at Possible Thaw” LINK).

Added to which, Trump’s ‘Art of the Deal’ approach (or, as we think of it, “throw everything at the wall and see what sticks”) has brought 70+ countries to the negotiating table (with some deals purportedly close to agreement).

So whilst we don’t agree with many of the economic arguments laid out by Navaro (& others) for going down the ‘tariffs’ route (see, for example, last week’s ‘Exorbitant Privilege’ analysis in the LVoF), the outcome of Trump’s negotiating style could be that America does a lot of trade deals (with global tariff rates, on average, potentially falling, i.e. if trade negotiations work out).

The key challenge, for many for assessing Trump’s overall approach, though, is to extract one’s personal politics and opinions of Trump and look at the hard facts. In that sense, Trump’s Administration is like ‘Marmite’ the famous UK spread for toast (i.e. it’s polarizing!):