Dan Greenhaus on Tariffs, Market Volatility, and Stock Performance

Market Reaction to Tariffs

• 📈 The market's performance today, up almost 2%, is ostensibly due to the suspension of a recently imposed tariff, indicating that tariffs still matter to equity markets.
• 💡 While tariffs still matter, investors likely believe they will contribute to less volatility now compared to earlier in the year (April/May).

Impact of Tariffs on Companies

• 🍎 For companies like Apple, a 25% tariff might result in a modest margin hit (around 100 basis points) for a company with margins in the 30s or 40s, which they could likely handle.
• 💰 The actual increase in the price of a product like an iPhone due to tariffs is estimated to be around $100 or less, which consumers might absorb.
• 🤝 Companies are reaching out to vendors and suppliers for burden sharing to mitigate the impact of tariffs, suggesting tariffs won't be as detrimental to margins as feared.

Broader Market and Economic Factors

• 📉 A significant drop in yields (around 10 basis points) is a critical part of the market story, as rising yields could have caused equity turbulence.
• 📊 Lower yields, combined with holding up economic growth and strong earnings, are beneficial for the stock market.
• 💰 Even a 5% yield on the 10-year Treasury might not be deleterious in the medium term, especially if the economy and earnings continue to perform well.

Earnings and Market Outlook

• 🚀 There's a growing sentiment that earnings may be less impacted by tariffs than initially feared, potentially supporting market multiples.
• 🛍️ Retail companies like Williams Sonoma, Urban Outfitters, and Deckers have reported, and their stock charts suggest investors are less concerned about tariffs in the longer term.
• 💬 The strategy of burden sharing with suppliers is a key reason why tariffs are not expected to be as detrimental to company margins.