Is a potential bull market halt imminent? Trade talks drag on

The market’s bull run to consecutive records could be derailed as President Donald Trump’s trade battle drags on, according to UBS.

The Wall Street firm’s head of U.S. equities David Lefkowitz believes the uncertainty on trade could dampen business sentiment and delay rate cuts from the Federal Reserve.

“There could be a pause in the bull market in the short-term,” Lefkowitz said in a note to clients. “President Trump continues to threaten higher tariffs and extend the timeline for reaching trade agreements. This is a damper on business investment decision-making and could also further push out the timing of Fed rate cuts.”

The S&P 500 has bounced more than 30% off its low on April 7, reaching four record highs this week as the index topped 6,300 for the first time. Investors have cheered resilient economic growth and corporate profits even in the face of higher tariffs. 

While there have been a few deals between the U.S. and its trading partners, the uncertainty isn’t likely to be fully lifted before the Trump administration’s Aug. 1 tariff deadline. The EU is preparing countermeasures in case of a no-deal scenario, while India appears unfazed.

UBS said it holds a neutral view on U.S. equities for now, which is not necessarily a negative stance but a cautious one due to trade risks.

“It appears that investors are already pricing in a substantial de-escalation in trade frictions,” UBS said. “We believe the bull market is intact, and stocks will likely rise further over the next year.”