Aniket PujariFurther stock market weakness likely will cause President Donald Trump to blink on tariffs, in the view of Bank of America’s Michael Hartnett. Though administration officials have repeatedly said that they view the current stock market correction as a temporary reaction to the president’s pro-Main Street agenda, eventually Trump will react, the bank’s chief investment strategist said in his weekly analysis of market trends. “We say this is a correction, not a bear market in U.S. stocks,” Hartnett wrote. “[M]arkets stop panicking when policy makers start panicking’ … since equity bear threatens recession, fresh declines in stock prices will provoke flip in trade & monetary policy back to ‘he loves me’ stance.” The observation comes with markets tumbling largely on fears that Trump’s widespread tariffs will spur inflation and possibly tank the economy. The S & P 500 on Thursday fell into a 10% correction from its February high, though markets were strongly positive Friday. .SPX 1M line S & P 500 path to correction over the past month. Hartnett thinks the market damage will be limited, but he doesn’t expect the selling is over yet. The large-cap S & P 500 index would be “a good buy” should it hit 5,300, which would be another 4% lower from Thursday’s close, and when institutional investors’ cash levels surge above 4%. One “ominous” sign that he sees during the current sell-off is the simultaneous decline in both stocks and Treasury yields, a trend he said is similar to market behavior in 2000, 2002 and the 2008 financial crisis period. “Good news is financial conditions [are] easing” Hartnett noted, citing lower yields as well as declines in the U.S. dollar and oil.” Hartnett added that “corrections end once sell-off ‘laggards’ crack,” citing rising credit spreads. “Bottom line…up-in-stocks, up-in-yields, up-in-dollar positioning painfully up-in-smoke thus far in ’25, but sentiment/positioning/price signal equity correction not quite over,” he said.
