Bloomberg Surveillance: May 1, 2025 - Tariffs, Tech Earnings, and Fed Policy

S&P 500 Target and Tariff Relent

• 🎯 Binky Chadha has revised his S&P 500 target to 6150 by year-end, down from 7000, contingent on a credible relent on trade policies.
• 💡 A "credible relent" means convincing the market that trade policy issues are largely resolved, potentially through mushy trade deals and a re-evaluation of uniform tariffs that hurt US growth.
• ⚠️ The risk is that this policy adjustment comes too late, triggering non-linearities of recession and significantly impacting US earnings, potentially by $56 per S&P 500 EPS on a 12-month basis.

Political Drivers and Economic Checks

• 📈 Presidential job approval ratings and consumer confidence are identified as key drivers for policy shifts, especially with upcoming elections.
• 🏛️ While the stock market may not act as a check, bond markets and broader financial markets are seen as influential, with the Treasury Secretary warning of economic repercussions.
• 📜 Brian Gardner suggests President Trump is driven by legacy rather than polling, aiming to restructure the US economy and global trade, potentially through negotiated deals.

Tech Earnings and Corporate Outlook

• 🍎 Dan Ives remains bullish on Apple's long-term ecosystem but emphasizes that commentary on tariff negotiations and the iPhone 17 launch will be more critical than quarterly numbers.
• 📉 He anticipates that earnings growth could drop to zero in Q2 and turn negative in Q3 if tariffs remain in effect, with potential 10-15% cuts to earnings estimates.
• 🚗 Regarding Tesla, Ives views Elon Musk's return as CEO as a huge positive, despite past board drama, and believes autonomous driving and robotics will be key growth areas.

Federal Reserve Policy and Consumer Spending

• 📊 Ian Lyngen of BMO Capital Markets argues that the 2-year yield trading below Fed funds indicates the market anticipates future rate cuts, not necessarily that current policy is too tight.
• 🗣️ He expresses apprehension about the political pressure on Fed policy, noting that while administrations often push back, the current real-time vocalization is unique and could create uncertainty.
• 🛒 Consumer spending data is mixed, with Visa showing no signs of weakening, while McDonald's expresses caution about the middle-income consumer, making it difficult to gauge future price tolerance.