- Since the president pressed pause on some tariffs, we may be past peak uncertainty but not maximum pain, according to Fundstrat cofounder Tom Lee. Stocks fell Monday, the 10-year Treasury rose, and Trump called on the central bank to cut interest rates.
Conditions have somewhat calmed since the president put his sweeping tariff regime on ice and floated talks of trade deals. But we may not be totally out of the woods.
“We’re probably past peak uncertainty,” Fundstrat cofounder Tom Lee said on CNBC Monday. “But I don’t know if we’re past maximum pain.”
It’ll be hard to match the level of fear investors felt post–Liberation Day, he said. That fear fueled a selloff in the stock and bond markets; consumer confidence plummeted; and inflation anxiety soared. But he believes the stock market hit bottom. Still, that doesn’t mean there won’t be any more pain: Investors and markets could remain hesitant because of all that has happened thus far.
Stocks fell Monday as investors continued to sell. The S&P 500 slipped 2.96%, the tech-heavy Nasdaq shed 3.28%, and the Dow lost 2.84%, at the time of writing.
“I think a structural low did take place,” Lee said, adding later, “There’s a chance we could be drifting dangerously close to that again in the next couple of weeks because there’s still probably a lot of investors sitting on their hands.”
On CNBC Monday, UBS head of multi-asset strategy Evan Brown similarly said: “We’re now in a de-escalation mode when it comes to the tariffs.” But again, that doesn’t indicate the economy is in the clear by any means—and all eyes are on the Federal Reserve.
Brown said Fed Chair Jerome Powell will have to make a move and cut rates eventually, but “he has to be hawkish before he gets dovish.” Powell has to show the central bank is on top of inflation, which most anticipate to climb because of tariffs; the question is whether it’ll be a one-time price shock or an ongoing one. On the other hand, tariffs could slow the economy via less business and consumer spending. So in his mind, the central bank will only cut rates once it sees the economy actually weakening rather than on sentiment alone.
The worst-case scenario would be if the Fed cut interest rates, since the economy looks resilient, but then inflation spikes, Brown said. That’s where stagflation concerns come in: “That is a very bad situation,” he added.
Trump clearly wants lower interest rates. After he said Powell’s termination cannot come fast enough, he posted on social media Monday once again calling for interest-rate cuts and calling the Fed chair “Mr. Too Late.” The yield on the 10-year Treasury note rose Monday, something Trump appears to care about.