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Markets May Face More Turbulence as Tariff Risks Persist

Despite recent signs of resilience in U.S. equities, the stock market remains vulnerable to sharp swings as trade tensions between the U.S. and China continue to unsettle investors. Piper Sandler, a leading investment bank, cautioned that the market isn’t out of the danger zone yet, citing technical indicators and unresolved macroeconomic risks.

Technical Resistance Still in Play

In a market note released Tuesday, Piper Sandler’s chief market technician, Craig Johnson, emphasized that although investors are cautiously re-entering the equity space, the S&P 500 has yet to convincingly reclaim key technical milestones.

“Technically, we are not out of the woods yet,” Johnson wrote. “We’d like to see the S&P 500 recover its March lows and move back toward its 50- and 200-day moving averages near 5,750 to 5,800.”

Currently, the S&P 500 is hovering around 5,395—still roughly 7% shy of that target. If the index fails to rally past these resistance levels, a correction could be imminent.

Tariffs Cast a Long Shadow

The backdrop to all of this is the rapidly evolving trade war, which intensified this week after the U.S. announced a sweeping 145% tariff hike on Chinese electric vehicles. This was followed by Beijing halting deliveries of Boeing aircraft and signaling further retaliation.

These actions have spooked global markets and sent investors scrambling toward safe-haven assets like gold, which surged past $3,275 an ounce earlier this week. Meanwhile, key equity indices such as Japan’s Nikkei 225 and South Korea’s Kospi dropped more than 1% on Wednesday alone.

Shift in Focus: From Tariffs to Earnings

Johnson believes that investor sentiment may shift in the short term, driven more by corporate earnings than by geopolitical friction.

“We expect investors to temporarily shift their attention to earnings and away from tariffs, allowing the macro picture to settle down in the upcoming weeks,” he said.

The earnings season has already seen several positive surprises, particularly in sectors like technology and energy. If this trend continues, it could provide a much-needed cushion against external shocks.

Other Analysts Weigh In

Market strategists from other institutions have echoed Piper Sandler’s cautious stance. Morgan Stanley notes that while the S&P 500 has shown strength, "headline risk" from the trade war could disrupt momentum at any point. Bank of America, meanwhile, predicts increased volatility ahead, with VIX futures pricing in a 20% chance of a sharp market correction before summer.

What to Watch Going Forward

• Technical levels: Watch whether the S&P 500 breaks above 5,750–5,800.
• Earnings reports: Big tech and financials will be in focus next week.
• Tariff escalations: Pay close attention to retaliatory actions from China and potential further U.S. sanctions.
• Safe-haven flows: Gold and Treasury yields can offer clues to broader sentiment.

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While there are signs of market optimism, investors should tread carefully. With key technical resistance still unbroken and geopolitical tensions unresolved, the path forward remains uncertain. A temporary earnings-driven rally may offer some relief, but deeper volatility tied to trade developments could return at any moment.

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