(Bloomberg) -- It didn’t take long for anticipation of Jerome Powell to become anxiety over Donald Trump. The president stepped up his belligerence on trade, promised a response to fresh China tariffs, and stocks were sent reeling. After briefly turning positive on the Federal Reserve chairman’s dovish monetary message, the S&P 500 slid as much as 2% after Trump said “we don’t need China” and that the U.S. would be “better off without them.”
Here’s what strategists and money managers saw:
Yousef Abbasi, global market strategist at INTL FCStone“Right now, people aren’t focused on ‘OK, Powell did a pretty good job there.’ They’re focused on ‘Wow, he’s ramping rhetoric again.’ It is uncanny that both times it’s happened right after a Fed event. He’s gone from throwing Powell under the bus to now outright labeling him an enemy of the state essentially. This is going to be much tougher to walk back. If you are one of those people looking for a prolonged trade war, this certainly plays into that narrative. The only thing Trump can really hope for is that China comes back and says ‘We’re willing to negotiate on some of the sticking points we have.”’
Kim Forrest, chief investment officer at Bokeh Capital Management in Pittsburgh“China took it to a new level this morning. This is escalating. It can’t go on. It can’t go to infinity and beyond -- that’s just that. There is no legal precedent for him to say people have to leave China, that companies can’t do that. This whole tariff thing has finally blown up to the point that they both are equally unhappy and have to come to the table. And I think the Street is looking at things like I am saying, ‘These two have gone on for way too long. Let’s just get something done.”’
Michael Antonelli, institutional equity sales trader and managing director at Robert W. Baird & Co.“It’s like a boxer being punched a 100th time. There have been a lot of punches, but there may be one punch that knocks him to the ground. If there was an expectation of some sort of trade deal, it needs to be ratcheted lower at this point. It’s not going to get better any time soon. Pretty soon, there would be no base case of a trade deal happening before the election, just because the rhetoric continues to be ratcheted up.”
John Augustine, chief investment officer at Huntington Private Bank“It’s potentially shifting to a new dynamic. Both countries are running out of goods to tariff, potentially, yes. If the two countries decide that upping tariffs isn’t getting the job done and a new path needs to be taken, yeah, markets will recognize that in a negative view. We’re going to be waiting to see what the U.S. response is going to be this afternoon. ... Markets right now are anticipating more tariffs, acceleration of tariffs or a new direction -- but of course, one of the parties could take the high ground and say ‘Enough is enough, we need to settle this,’ and that could swiftly change market reaction to be more positive. We shall see.”
--With assistance from Sarah Ponczek.
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