With a Lull in Tariff News, What Can We Expect in the Markets as We Enter Q3

As we move into the third quarter of the year, the state of the markets is at the top of the minds of investors. With a recent drop in significant tariff announcements, investors are left wondering about the implications for their portfolios in the weeks ahead.

In this post I will analyze the potential effects of this quiet period and what it may mean for the stock market’s performance in Q3.

Tariffs play a critical role in global trade policies. Recently due to trade conflict, various tariffs have created market volitility and have affected goods from steel and electronics. Tariffs are not something new. In 2018 the U.S. imposed a 25% tariff on imported steel and a 10% tariff on aluminum, which caused significant price changes and shifts in supplier demand and where consumers purchases their products.

With fluctuating tariffs, companies that depend on imports often see their stock prices impacted immediately. Companies like Boeing faced rising costs of aluminum due to tariffs implemented in previous years. On the other hand, firms that export may find themselves in a better position or face new trade challenges globally.

As investors have enjoyed a little calm in the tariff debates, many are left wondering the potential outcomes of this quiet time—whether toward market stability or more unpredictable volatility coming.

In recent months, we have witnessed fewer major changes in tariffs. This lull has created some calm in the markets and a small comeback in the stock market. Economic reports reveal that investors are likely on the sideline or trading in a conservative manner though.

Analysts are particularly attentive to statements from policymakers or data that could trigger new negotiations or changes. The absence of significant tariff news often leads to a comforting sense of reliability for businesses, allowing them to strategize and prepare effectively.

Manufacturers usually feel the direct effects of tariffs on parts and raw materials. Reduced uncertainty can benefit this sector significantly. Car companies for example, U.S. based ones like Ford or General Motors may ramp up production if they know tariffs won't spike again. The potential for increased output and profits is real if manufacturers can operate without the threat of changing costs.

The tech sector, which relies heavily on global supply chains, has experienced its share of tariff-related problems. Apple, Nvidia and Microsoft have made the headlines during the tariff talks. The 25% tariffs on some Chinese imports previously impacted their pricing strategy, but a consistent environment can allow them to focus on new products and their longer-term plans.

For consumer goods, a stable status on tariffs usually leads to more reliable retail pricing. Without the volatility from potential price spikes, companies that sell everyday items, can forecast sales more accurately. This can lead to a more positive consumer sentiment as well.

The financial services sector often performs better in stable conditions. Lower uncertainty leads to an uptick in lending and investments. When large banks think the markets are more stable, they are more likely to give out loans, which helps economic growth.

The bottomline, investors need to patient and diligent. Things could change in the next month. Trade talks will pick up and as we know from the first batches of tariffs earlier this year, things can change fast. Investors should have a well-balanced portfolio while we wait and see.

Diversifying investments is essential to mitigate risks, especially when dealing with potential shifts in tariff policies. While some sectors may experience benefits from quieter times, others might see volatility.

Tariffs are only one piece of what is affecting the global economy. Other factors, including geopolitical issues, currencies, and shifts in consumer behavior, also play big roles. A downturn in any of these could impact the market’s performance, even when the tariff news seems stable. Is this the calm before the storm?

Trade negotiations among major economies also affect overall economic policies. U.S.-China trade discussions usually lead to changes bigger than tariffs and are monitored by all major countries because their talks could impact the world.

As we approach Q3, here are some thoughts for investors:

1. Educate yourself - Regularly read and watch reliable financial sources for the latest news and economic data. Understanding what is going will give you an idea on what your next move should be.

   
   

2. Diversify - Distributing investments across multiple sectors can reduce risks with changing tariffs. If you’re in tech stocks, consider some bonds or notes. If you like investing in U.S. based companies, look at currencies and price flucations against the dollar. While we have global tension and uncertainty in certain countries, look at the metals. These are ideas that can help you diversify your portfolio.

   
   

3. Monitor Reports - Pay attention to quarterly earnings. Make adjustments to your portfolio based on these reports.

   
   

4. Be Prepared for Swings - Tariff changes can happen at any time, leading to quick market moves. Have plans in place to adjust your investments as needed. Have a few ideas that can help if the market surprises, which it does and will do.

Bottomline, no one knows what will happen so preparation is key. Be ready and informed as much as possible and if you don’t know what to do, the sideline isn’t a bad place to be while we wait for the next steps. These uncertain times can create some of the best opportunities if the proper steps are taken by traders.

Disclaimer: Past performance is not indicative of future returns. Opinions are my own. Profitable trades are not guaranteed.