Todd Campbell
5 min read
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Legendary fund manager issues stock market prediction as S&P 500 tests all-time highs originally appeared on TheStreet.
It's been a remarkable ride since President Donald Trump announced widespread tariffs on April 2. Trump's so-called “Liberation Day” announcement included harsher tariff rates than hoped, forcing investors to rethink their expectations for the U.S. economy.
There's evidence that a U.S. economic slowdown is underway, and despite tariff negotiations, tariffs could still push the economy into stagflation or recession. The economic risk raises questions over what's likely to happen to stocks, which usually perform best when a humming economy fattens wallets, allowing households and businesses to ramp up spending.
The post-Liberation Day stock market drop lopped 19% and 24% off the S&P 500 and Nasdaq Composite, respectively, from all-time highs in February.
Related: Wall Street veteran analyst who predicted stock market rally resets forecast
The decline was concerning, but "buy the dip" investors took advantage, boosting buys into extremely negative sentiment with most measures flashing "oversold."
Since April 9, when President Trump paused most reciprocal tariffs that had been announced on April 2, the S&P 500 and Nasdaq 100 have rocketed higher, gaining 22% and 30%.
The returns have been so significant that major market indexes, including the benchmark S&P 500, are flirting with all-time highs again, prompting veteran Wall Street bond manager Bill Gross to chime in with an updated outlook.
Gross has been navigating good and bad markets since 1971. He is the co-founder of Pacific Investment Management Co., or PIMCO, a Goliath money manager with $2 trillion under management. His former role atop the $270 billion PIMCO Total Return Fund earned him the “Bond King” moniker before he left to join Janus Henderson Investors from 2014 to 2019.
Given his long track record, investors may want to pay attention to what he's thinking happens next.
Many are debating what may happen to the economy next. Some believe that tariffs will tax already cash-strapped consumers later this year, slowing economic activity, as businesses also crimp spending awaiting trade deal insight. Others think tariff risks are fleeting and overblown.
The jobs market remains healthy, given that unemployment is relatively low at 4.2%. However, the unemployment rate was 3.4% in 2023, and companies have announced over 696,000 layoffs this year, including 93,816 job cuts in May, up 47% year over year, according to Challenger, Grey, & Christmas.
