One analyst says he is bullish on equity markets despite uncertainty and headwinds from tariffs.
Stock markets in both Canada and the U.S. were faring slightly better during Wednesday morning trading after a broad selloff on Tuesday. Ross Mayfield, an investment strategy analyst at Baird, said in an interview with BNN Bloomberg Wednesday that tariffs have become the “dominant narrative” in the market.
“I think we’re in a tricky spot right now because there’s as much of an underlying scare about economic growth… as there is about the potential for tariffs to weigh on profits and potentially spark a second wave of inflation,” he said, highlighting U.S. employment figures released Wednesday that came in softer than expected.
“Ultimately we remain bullish but think that there could be some more downside weakness here given the kind of cacophony of headwinds.”
One reason to be optimistic about the current market, according to Mayfield, is that despite companies highlighting tariffs as a potential headwind during fourth quarter earnings, “we just printed the best quarter of earnings growth for the S&P 500 since really the COVID-19 pandemic recovery.”
“The corporate fundamentals are on really solid ground. There are a lot of tailwinds there that are not as discussed as the potential headwinds in the form of tariffs, but there’s still potentially tax cuts to corporations on the time horizon,” he said.
“There’s the deregulatory narrative, and then broadly, companies are just really performing at a high level.”
Meanwhile, Mayfield said that while there are signs of a cooling off in the U.S. labour market and consumer sentiment, there are not “outright signs of weakness.” He added that the consumer is still in “good shape.”
Investors have been keeping close tabs on the latest developments regarding tariffs, with an executive order from U.S. President Donald Trump taking effect just after midnight on Tuesday, placing a 25 per cent across-the-board tariff on goods from Canada and Mexico, with a 10 per cent levy on Canadian energy.
On Wednesday, U.S. Secretary of Commerce Howard Lutnick hinted that the two countries could meet “somewhere in the middle,” saying an announcement could come later today. However, Bloomberg News reported Wednesday that Prime Minister Justin Trudeau said Canada won’t drop its retaliatory tariffs if any tariffs on Canada remain in place.
