Analysts: The preliminary trade agreement between the US and the UK is unlikely to alleviate the headwinds facing the US stock market.
On May 10, Jake Schurmeier of Harbor Capital said that despite the limited transparency increase brought about by the US-UK trade deal, the investment prospects of risk assets are still unattractive. Schurmeier estimates that the U.S. real tariff rate will quadruple to 12% as the 10 percent tariff becomes the bottom line in Trump's trade deal, putting pressure on corporate profit margins. A possible rise in consumer prices will make it difficult for the Fed to manage inflation expectations and implement interest rate cuts. "I tend to be neutral on equities" because higher import costs "can significantly slow economic growth, which cuts into profit margins," he said.