As the U.S. New York Stock Exchange set a new all-time high, some in Wall Street warned that investors are underestimating the risks of tariffs. There are also concerns that if the upcoming earnings reports from corporations fall short of expectations, the resulting stock price declines could be larger than the market anticipates.
According to Bloomberg on the 20th (local time), some influential figures on Wall Street pointed out that the recent strong stock price increase in the New York market does not fully reflect the risks of tariffs. Regardless of the final tariff levels that will be determined, the risks associated with the tariffs currently being implemented by U.S. President Donald Trump are already significant, yet investors are underestimating them.
Alastair Pinder, chief global equity strategist at HSBC, noted that rising tariff rates could reduce the profit growth rates of U.S. corporations by more than 5%.
According to estimates by Bloomberg Economics, the average tariff rate currently paid by U.S. importers has already risen to over 13%, more than fivefold compared to last year. The reciprocal tariff by country is set to take effect in August, but basic tariff rates, including 10% and tariffs on steel and automobiles, are already in place.
Bloomberg expressed concern that if disappointing results come from corporate earnings and economic indicators for the remainder of the year, it could undermine the foundation of the recent stock market rally. As the second quarter earnings season is underway, if corporations' earnings fall short of market expectations, investor sentiment could significantly worsen.
Bloomberg reported that while large U.S. banks like JPMorgan Chase and Goldman Sachs announced 'surprise earnings' last week that greatly exceeded market expectations, they received a tepid response. JPMorgan's stock fell by 0.7% on the day of the earnings announcement, while Goldman Sachs only managed a 0.9% rise despite the surprise earnings.
In this regard, Bloomberg analyzed that 'most favorable factors are already priced into the stocks, and disappointing results are met with harsh and rapid penalties.'
Greg Taylor, chief investment officer at Pfeifferfund Capital Management, pointed out that 'all favorable factors are already reflected in the stock valuation at the current level.'
Michael Arone, chief investment strategist at State Street Global Advisors, also expressed concern that 'if expectations are not met in a high valuation environment, the resultant penalties could become even harsher.'
Beginning on the 23rd (local time) with General Motors (GM), companies like Tesla and Google’s parent Alphabet on the 24th, and Intel on the 25th are set to announce their earnings.