Morgan Stanley: "April 2" is not the "end of negative news" for U.S. stocks

The effective date of Trump's "reciprocal tariffs" is approaching, but some analysts believe that April 2 may not bring clear answers for the market, and investors should not view it as the moment the "shoe drops."

On March 31, Michael Zezas, the head of global fixed income research at Morgan Stanley, pointed out in a recent report that the date of April 2 has long been circled on investors' calendars, as it is the date President Trump promised to announce the scale and details of global tariffs. The government has stated that fair trade relations are the goal, with the principle of reciprocity guiding the implementation of tariffs, "but beyond that, very little is known about what this policy will entail."

"This is not reassuring for the investors we communicate with, who are confused by tariff announcements, negotiations, delays, and constantly changing implementation levels regarding Mexico, Canada, and certain key products," Zezas wrote. "This reciprocal tariff policy could affect a wide range of products and countries, and the government seems to still be considering whether tariffs need to account for foreign consumption taxes and non-tariff barriers."

Faced with numerous variables, Morgan Stanley believes that choosing a single path to guide investment strategies is meaningless, but instead recommends waiting for April 2 to answer two key questions: whether the announcement can clarify tariff policy, turning it from unknown to known; and whether the increase in tariffs is significant enough to further worsen the economic outlook.

Morgan Stanley stated that by April 2, the market may not obtain all clear information, but may receive some usable clues. Morgan Stanley analyzed the possibilities and impacts of different scenarios:

• High clarity with small tariff increases: If the announcement on April 2 provides high clarity, with small tariff increases and no further plans to expand tariffs, the additional hit to the economic outlook may be relatively small. However, the tariffs already implemented are expected to exert pressure on the economy, and even if there are no new significant tariffs on April 2, U.S. economic growth is still expected to slow significantly this year.

• Low clarity but a commitment to significantly increase tariffs: If the announcement on April 2 lacks specificity but commits to significantly increasing tariffs, this will not clearly worsen the already below-consensus economic growth expectations. The lack of specificity may imply the possibility of alleviating tariff increases through negotiations.

• High clarity with significant tariff increases: If investors receive clear information about significant tariff increases on April 2, this will be most favorable for fixed income relative to stocks. This may include tariff increases beyond tariff differentials, considering foreign consumption taxes and non-tariff barriers, and clearly indicating that the threshold for negotiating with trade partners to alleviate new actions is very high. In this case, U.S. economic growth expectations will be significantly below consensus, and stock prices may decline.

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