'We're not out of the woods': Wall Street strategists say stock market's pain won't end with Trump trade deals

President Trump said last week that it was a good time to invest in the stock market. But Wall Street strategists told Yahoo Finance that volatility may not be over for equities despite more investor optimism surrounding trade deals.

“Right now, we’re not out of the woods. I don’t think it’s necessarily a ‘pound the table’ time to buy stocks per se,” Brian Vendig, MJP chief investment officer, told Yahoo Finance in an interview on Friday morning. “In the short term, this volatility is not going away.”

During Thursday’s unveiling of a UK-US trade deal, stocks climbed to session highs as Trump talked up more deals to come, along with a tax bill making its way through Congress.

“You better go out and buy stock now,” he said. “This country will be like a rocket ship that’s straight up.”

The focus this weekend is Treasury Secretary Scott Bessent’s meeting with Chinese officials. Trump has hinted at lowering the tariff rate on Chinese imports, which currently sits at 145%, to 80%.

Read more: The latest news and updates on Trump’s tariffs

Investors may be optimistic that a US-China deal will lead to similar agreements with other countries. But the question is how fast these deals will come. The Trump administration’s 90-day tariff pause will end on July 9.

“The biggest risk is time,” Vendig said. “If these things don’t happen appropriately or efficiently over the next 60 days, the biggest risk to the US economy [is] not only in the psychological concerns around demand, but it’s also inventory levels.”

Indeed, Chinese exports to the US tumbled in April from a year earlier, while its trade with other countries increased.

“Some of the damage is already taking place,” William Dudley, former president of the New York Federal Reserve, told Yahoo Finance.

“We’ve already set the stage for supply chain frictions that will be plaguing the US economy over the coming months, even if we negotiate trade deals with these foreign countries,” he added.

Read more: 5 ways to tariff-proof your finances

Although hard data like the most recent monthly government jobs report has yet to signal a significant economic slowdown, soft data like consumer surveys are flashing warning signs.

American workers are the least confident they’ve been in over four years about finding a new job if they become unemployed. Consumer confidence has hovered at its lowest level since the early days of the pandemic.

Meanwhile, some companies have pulled their outlooks this earnings season, citing the unpredictability of US tariff policy.

“There is some level of uncertainty that has been already injected in the system and probably will be difficult to undo,” Vanguard chief economist Roger Aliaga-Díaz said.

Aliaga-Díaz said he will be looking at inflation prints, among other data, for signs of tariff impacts and a potential economic slowdown.

“We’re going to see that price shock first,” he said. “That is going to eventually turn into a slowdown in activity that is in consumer spending data more toward the back end of the year.”

To be sure, some market watchers think early signs are that Trump’s “Liberation Day” tariffs won’t be as punitive as initially thought. That could at least limit the downside to stocks.

“I wouldn’t say that retesting the lows is out of the question by any means,” Baird Private Wealth Management investment strategist Ross Mayfield said, “but only if the administration gives some evidence that they’re going to lean back into that more restrictive trade environment.”

Still, given the uncertainty, investors should favor defensive plays, or stocks that are more recession-proof, right now, Truist co-chief investment officer and chief market strategist Keith Lerner told Yahoo Finance.

“Everything that’s going on with Washington — it’s complicated is the main thing,” Lerner said. He prefers sectors such as Utilities and Communications Services. “At this point, why should we be paying a peak multiple given the wide range of outcomes?”

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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