Another day, another report suggesting President-elect Donald Trump will look for creative solutions to impose broad tariffs on America’s trading partners.
CNN’s Kayla Tausche reported early Wednesday that Trump “is considering declaring a national economic emergency to provide legal justification for a large swath of universal tariffs on allies and adversaries.”
Following the report, stock futures pared gains and traded into negative territory.
About an hour before the market open, futures were little changed.
Wednesday’s market reaction is the inverse of what investors saw Monday when a report from the Washington Post suggested Trump may look to narrow the scope of his tariff proposals. After markets cheered that story, the president-elect denied it.
But the back-and-forth seen in the major stock indexes on Trump’s tariff bluster continues to play second fiddle to the most important factor for investors right now: the Federal Reserve.
Tuesday’s sell-off is the latest case in point.
Inflation data inside the ISM’s latest manufacturing PMI report, coupled with job openings data that showed an uptick in labor demand during November, saw markets price out another 0.25% rate cut from the Fedin 2025.
In turn, the Nasdaq fell almost 2% with stalwarts like Nvidia (NVDA) losing 6% after reaching an all-time high earlier in the session.
As Trump’s inauguration approaches, investors and newshounds will see many echoes of the run-up to his 2017 inauguration in recent newsflow — everything is on the table: renaming bodies of water, annexing Greenland, and so on.
Because markets don’t jump to price in the maximum risk posed by every Trump proposal doesn’t mean they don’t matter.
But the Fed meets times a year to vote on monetary policy, and interest rates are the most important driver of stock prices over the long term.
