Don’t be fooled. The S & P 500 is only 1.5% below an intraday record high of 6,128.18 set on Jan. 24. This comes even after the emergence of DeepSeek sparked a sell-off in many artificial intelligence stocks, and despite the latest back-and-forth in trade relations between the U.S. and key trade partners Mexico, Canada and China. The White House over the weekend unveiled a 25% tariff on goods from Mexico and Canada. By the end of Monday, however, those levies were halted for 30 days , as the U.S. negotiates with both countries. The U.S. also slapped a 10% tariff on Chinese imports, to which China responded with duties of up to 15% on select American products. But while the broad market index is holding up despite these rising trade tensions, investors should be wary of what this means for a key catalyst going forward: the Federal Reserve’s rate cut outlook. “While the immediate worst case for markets may have passed, trade policy uncertainty remains high and, in our view, means the hurdle rate for Fed rate cuts has risen. As a result, we remove our forecasted rate cut for March and leave only one 25bp rate cut this year at the June meeting,” wrote Morgan Stanley chief U.S. economist Michael Gapen. “We see this episode of on-again-off-again tariffs as amplifying the views expressed by the Fed at its December meeting, when most FOMC members were concerned about greater uncertainty regarding PCE inflation and saw risks to PCE inflation as tilted to the upside,” he added, referring to the Fed’s preferred inflation metric. “That uncertainty and upside risk have arrived more quickly than we anticipated.” As CNBC’s Jeff Cox noted in his Tuesday story, the rising trade tensions could put the Fed in a Catch-22. On one hand, does the Fed begin raising rates to tame inflation from these tariffs? Or does it stay in its downward trajectory? Regardless, if investors sense that the Fed may not lower rates as expected, it could put pressure on equities going forward. Elsewhere Wednesday morning on Wall Street, several analysts trimmed their price targets on Advanced Micro Devices after the chipmaker reported disappointing data center revenue for the fourth quarter . “AMD is improving its competitiveness across CPU and GPU products with Ryzen, EPYC, and Radeon Vega platforms and is on track to improve its market share and drive meaningful revenue growth in the near term. Long term, we believe share gains are less certain,” JPMorgan’s Harlan Sur said. He lowered his price target to $130 from $180, implying upside of just 8.8%.
On-again, off-again tariffs are having consequences even as S&P 500 holds up for now
