President Trump’s first 100 days: What’s happened and what’s next?

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Sam Azzarello: Welcome to Research Recap on J.P. Morgan's Making Sense. My name is Sam Azzarello, Head of Content Strategy for J.P. Morgan Research. And I'm joined by my colleagues Bruce Kasman, Chief Global Economist, Kamal Tamboli, U.S. Equity Strategist, and Natasha Kaneva, Head of Global Commodity Strategy. So in today's episode, we'll be looking at key insights from President Trump's eventful and action packed first 100 days in office and the potential implications of policy actions. With heightened trade policy uncertainty stemming from a flurry of tariff activity, we'll examine what this means for the economy, as well as look at other key policy implications. We'll talk about equity markets and the possibility for continued volatility. As well, we’ll be diving into potential commodity market moves and how trade policy is likely to affect oil prices. So, Bruce, let's start with you. J.P. Morgan Research expects an uncertain tariff environment to weigh on activity growth. And the U.S. real GDP growth forecast has been revised down. Tell us more about your view and what you're watching over the coming weeks and months.

Bruce Kasman: Well, it has been an eventful 100 days here. We had thought that the Trump administration would move aggressively on a number of fronts. But we had also anticipated that there would be  guardrails that would be reflecting a commitment to supporting the business sector and a sense that the economy's near-term performance would be of a priority. I think what we've seen has been more disruptive actions, particularly in the trade front, where we've increased tariffs quite substantially on a wide set of countries. We've also increased uncertainty quite significantly as tariffs have been both added and then taken away. And we remain in this uncertain environment on a number of bilateral negotiations going on here. And our net effect of these things has been to shift our forecast to actually incorporate a U.S. recession for 2025. The reasons for this recession, I think, come from really three channels we think are working through the tariff policies of the Trump administration. The first is we think it's representing a fairly substantial tax on the U.S. economy, probably scaled to somewhere in the 1 to 2 percentage point range of GDP. Second, there is a reasonable case that we're going to see disruptions in some important sectors, particularly with regard to trade in China. And then third, and perhaps most importantly now as we're tracking the U.S. economy, we think this shift in policy by the Trump administration is starting to weigh on sentiment, both because of uncertainty and because of the way that the economy is being managed by the policy stance in the early days. And I think the interaction of these things together is what drives the recession call. I'd want to emphasize that while we have a recession in our forecast, it's mild. And it's by no means preordained. In fact, I think the economy is doing reasonably well as we end the first quarter. Some of that is the health and resilience of the private sector. Some of it is also front loading of activity. We think it will take some time to realize the drags that are in place from the tariff shocks right now. But we look to see the economy begin to falter as we move through the middle part of the year and as we move towards a recession, which we expect to happen sometime in the third quarter.

Sam Azzarello: So you mentioned three transmission mechanisms. I want to zero in on the third one, sentiment. Because I always find sentiment so fascinating. Can you go a little bit deeper? Is that really just how we're all feeling about the current state of affairs?

Bruce Kasman: Well, I think there's two pieces that really come together here. One is just general uncertainty as policy is being implemented in a way that is somewhat erratic and is leaving open quite a bit of questions about where it's going to go next. And perhaps at the same time, a reassessment, as I said a minute ago, that, while we came into this year thinking-- and I-- when I say we, I think it's not just a JPMorgan Economics, but also the market and the business sector, thinking that this is an administration that wanted to do a lot of things, but would be supporting near-term economic performance and supporting the business sector particularly. And I think the actions that have been taken raise real questions about that. So the sentiment shift is both the heightened uncertainty as well as the reassessment that this may not be a business friendly administration, at least with regard to its policies towards near-term economic performance.

Sam Azzarello: OK, that's a perfect segue, then, to discuss other policies. What are other pertinent policies that you and the team are watching coming from the administration that could impact the outlook?

Bruce Kasman: Well, I think there's a lot going on, of course. That goes without me having to be a deep analyst. But I think in three areas beyond trade policy, we're focusing on its economic impact. One is immigration policy. The second is regulatory policy. And the third is fiscal policy. I think on the immigration policy, what we're seeing is a shift away from what had been quite a positive boost coming to U.S. growth, both from labor supply as well as from overall demand, from a very rapid pace of immigration over the course of 2022 through at least mid 2024. From our point of view, that is a component of what is slowing U.S. growth right now and potentially could be larger than we expect if we actually do start to see a more significant move towards deportations. The regulatory side and the fiscal side are more positive. The regulatory side, we think, is a positive. But it's a modest positive as we move through this year. We're not really lowering the costs of doing business in any meaningful way. We are removing some restrictions, making it somewhat easier to do business. And I think that is a positive. The fiscal side, I think, is still up in the air. We are seeing slowing in government spending. And it's not just on the federal side, but also state and local. It does look like it's almost certain we're going to extend the 2017 TCJA tax cuts. And then what we're going to get beyond that does feel to us like it's going to incorporate a modest set of tax cuts and a modest set of spending cuts. The net effect of which, right now, we don't have incorporating a significant additional impact on the economy.

Sam Azzarello: OK, thanks, Bruce. Kamal, turning to you, let's talk about equity markets. So v is for volatility. Is that here to stay?

Kamal Tamboli: This is obviously a very hard market for forecasters, given the headline risk being considered. So it's hard to say definitively, which is why we expect the equity market to remain range bound. From our side, there are two variables we're very focused on. One is the future state of policy, and the other is the U.S. business cycle and specifically what it means for U.S. corporates and households. Going into this year, the corporate picture was very strong, and we were more bullish on the policy side. 2025 bottom up corporate earnings estimates were pointing to 12% to 13% growth, the strongest since 2021, which benefited from reopening. There was a lot of optimism around key secular trends like the AI data center build out. Policy was largely expected to be supportive through deregulation and other pro-growth policies. Consumers were also set to benefit from lower energy prices and lower rates. Tariff-related risks were considered but ultimately discounted. So in short, the opportunities were supposed to outweigh the risks this year. But given the significant increase in policy uncertainty, especially in the past two weeks, there's a risk that this tariff shock negatively affects sentiment and spills over into the real economy, ultimately affecting consumer demand and complicating the situation for corporate supply chains and logistics. In our view, time is of the essence. We are quickly approaching a tipping point where it is much harder to reverse policy course. While we have pulled back from a broad based trade war, we are now more deeply involved in a trade war with one of our largest trading partners, China. If we see significant progress and closure on the tariff side, we expect volatility to normalize and decline and the business cycle to likely remain resilient. However, if we start to see renewed escalation, broad based sectoral tariffs, and US-China tensions persist, then we will likely be in a higher volatility environment for longer. And we really need to consider higher odds of tipping into recession. So, in short, the persistence of volatility will largely be a function of both policy and the reflexivity with the business cycle.

Sam Azzarello: Very interesting. I'm hearing a corresponding theme that Bruce mentioned, that you're seeing these negatives or cons outweigh some of the positives that many of us in the market were expecting with the new administration coming in. So you talked about a few different factors, all very interesting. If you had to kind of wrap it up with a bow, what does this mean for investors?

Kamal Tamboli: As I alluded to earlier, in this kind of environment, we expect the market to remain range bound. That means investors should look to reduce exposure on strength and add on weakness. Generally, we prefer a tilt towards defensive companies. And also, there's likely an opportunity for investors to selectively add exposure to quality growth companies as well, given the large momentum crash earlier in the year. Investors might also need to start looking beyond 2025 earnings and start anchoring on 2026, which may experience more growth and lower trade disruptions. Presuming we avoid a recession, 2026 likely has more fiscal supports if the proposed tax cuts are passed and perhaps a cleaner year if we have a meaningful trade de-escalation and some pickup in onshoring activity. The last thing I would draw attention to is the scattered mosaic investors have had to grapple with regarding U.S. corporates. The Liberation Day tariff hike happened just as the fiscal quarter was wrapping up. And many corporates entered their quiet period before earnings. This meant that many of them were unable to provide updated guidance, forecasts, and disclosures about the impact of trade escalation. What guidance there was from earlier in the year was now based on outdated tariff rates and based on a narrower subset of impacted countries. Over the next three weeks, nearly 80% of S&P 500 companies will report earnings, hopefully providing additional details about the impact of trade escalation. Given the policy uncertainty and still evolving trade narrative, it is very possible that corporates will find it difficult to provide concrete guidance. But what we would expect to gain at the very least, is clarity on mitigation strategies in the near term, the extent of supply chain exposure, and what it means for margins. This should hopefully address the open questions on the feedback loop of tariffs to U.S. consumers and foreign inform producers. Given the table stakes, this could be one of the most important earnings seasons since COVID. So to summarize, we expect markets to remain range bound in the near term. 2025 earnings are perhaps too fluid. And investors need to start looking at what a more trade neutral environment might be in 2026. And the next few weeks should arm investors with better information on what the impact of tariffs will be on earnings, investment, hiring, and sentiment. So stay tuned.

Sam Azzarello: Kamal, thank you. Turning and talking about commodities, a sector that President Trump has done many executive orders on and had a very significant focus on, Natasha, what's the current outlook for global oil demand? And how are you thinking about potential downside risk?

Natasha Kaneva: So very interesting question because we have high frequency indicators that we're observing on daily basis. And so what we see at the moment is we had a solid first quarter. It was very cold. And for all of us in New York, we know that, yes, it's like the coldest winter since, you know, in the last 25 years, for me at least. But what is interesting is that we also observed a lot of front loading in demand. So when we look at the volumes of the cargo ships, and the bunker fuels, and all of that, it was absolutely solid. What we expect now with this 90 day delay in the reciprocal tariffs, that we actually expect another healthy second quarter. And so the numbers actually are confirming that. So we see the Chinese cargo volumes are up 9% year to date through April 13. That's the latest data we have the volumes of cargo that are going through the Chinese ports are up about 4%. So we absolutely see no slowdown. People continue to either we use the word trade or frontload, one of those. But we can confirm that actually it's maintained on a very healthy levels. So what we acknowledge is that there are cautionary signs that are emerging in the US. And its travel. So if you take the look of the TSA numbers, we see a drop, actually. The year-- three months today in April, we see about almost 2 percentage point drop in the travels, interestingly enough, to the US, but from the U.S. as well. Outside of the US, actually, there is no signs at all of the slowdown. And if we remove the U.S. out of the flight data, we actually see record volume of travel outside of the US. So that's actually pretty supportive for that. What is also interesting is that despite-- at this point, it's about 12% to 13% drop in the gasoline prices. We have not seen a pickup in the gasoline demand in the United States, which is strange because the beta of sensitivity of demand to the price is very high, and we should have seen some pick up. But so far we're not observing that. So putting all of that together is that we most likely will have a solid first half of the year in the oil demand, a weaker second half of the year. But what I want to point out is that-- and it's building upon what Bruce said-- is that since World War II, we had only two examples of global recession, as it was the COVID and the GFC. It's very, very rare to have something like that in the case of oil. Actually, since China became a superpower since early 1990s, we had only two examples of oil demand turning negative. And again it was GFC and the COVID. So hopefully, that's not going to be the environment this time around. So our economists are giving us a mild recession in the United States. So actually, we still have a very, very solid growth in demand. Interestingly enough, it's two times higher than all our competitors. So it's just when we look at the numbers, it tells us that actually demand is holding up so far.

Sam Azzarello: Natasha, as a corollary question, the administration has spoken a lot about lowering oil prices. How feasible is that? How possible is it for government policies to lead to a lower oil price?

Natasha Kaneva: So I think the feed through, it's not through the policies. It's actually what is happening in Bruce's world. And clearly we're looking at the $64 Brent price at the moment as we speak. So the prices are trading at the moment about $15 below fair value. And so it's this toxic mixture of what is being priced at the moment. It's about 80% of the mild recession but, importantly, one million barrels per day of additional supply from OPEC. Interestingly enough, both announcements-- the tariffs and the OPEC increasing unexpectedly production, three times more than what the market was expecting three times higher-- all of that happened on April 2nd. So is there a connection? Is there no connection? It's everybody's guess at this point. But what is most important to me personally as a person who analyzes that, is that the floor to the price is now being removed. Previously, we were expecting that at $70 price, OPEC will step in and do something. But under the Biden Administration, the floor is actually very, very strongly at about $70 because that's when the administration was guiding the refill of SPR. The official price, was $69 WTI. It's about $73 Brent, and that was a very, very strong price floor, under the market. So at the moment, this is gone. Yes, and so I think the Trump Administration is very actively and openly pursuing a substantially lower oil prices. We have a number in mind. It's actually $50. They're very explicit about that. Now they're saying it's actually $50 to $55. But that's where the floor to the price is. It's not that much the policies. It's that just the messaging about everything else.

Sam Azzarello: I always find it fascinating how our research analysts pull from different data sets, factors, and analysis to create a mosaic of a view. So I want to thank Bruce, Kamal, and Natasha, and I want to thank all of you for tuning in to Research Recap on J.P. Morgan's Making Sense.

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