While it's too early to hope for a significant market rally in the wake of President Donald Trump imposing tariffs on most of the world, the market selloff may be running out of steam, according to Greg Valliere, chief U.S. investment strategist for AGF Investments.
In his Monday morning newsletter, published before the U.S. markets opened and swung wildly between gains and losses in morning trading, Valliere pointed to five "signs of hope" for a letup in the market turmoil.
Trump said Sunday that the U.S. was “stronger” from the tariffs and told reporters he was receiving calls from foreign leaders who want to negotiate, The Hill reported.
First, "Republicans want this to end," Valliere said. "There’s a palpable sense of fear among Republicans on Capitol Hill who worry that the market crash could cost them the House and even the Senate in the 2026 elections."
Valliere says to watch Ted Cruz, "the Texas firebrand senator who adamantly opposes tariffs, which he views — correctly — as taxes." Cruz "has a safe seat for nearly six years, and if he attracts other GOP senators, Cruz could become a major anti-tax albatross for Trump."
Another glimmer of hope is that the first sign of tariff negotiations "came this weekend when Vietnam said it would like to deal; bigger countries are whispering that they also want to negotiate — and Trump will listen," Valliere wrote.
Also, he said, stimulus is coming.
"It’s a given that the Federal Reserve will cut rates, probably not as soon as in May but most likely by summer," Valliere wrote. "And fiscal stimulus is also coming — in a massive tax bill that will come into focus this summer or earlier."
The strategist also called inflation worries "hysteria" and predicted a slowdown in price growth.
"The likelihood of market uncertainty and reluctant consumers could bring a bout of disinflation, in our opinion," he wrote. "The price of oil in recent days may be a hint."
Finally, Valliere sees no imminent recession. "Despite handwringing about a recession, modest growth may persist," Valliere stated. "It’s difficult to see a recession with 4% unemployment and trillions in monetary and fiscal stimulus coming this summer."
The bottom line: "We think trade wars may persist for many more months, but at some point, the markets may run out of sellers and Republicans will tell Trump to wrap up the tariff war," Valliere concluded. "Another election is always just around the corner, and suddenly the Republicans are looking vulnerable in the next one."
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