PITTSFIELD — Investors should brace for turbulence, says local financial adviser Bill Schmick, after a federal appeals court ruled that most of former President Donald Trump’s tariffs were illegal but kept them in place until October.
On Friday, the U.S. Court of Appeals for the Federal Circuit ruled 7-4 that Trump had overstepped his authority in using emergency powers to impose many of the tariffs. While the court kept those tariffs in place until Oct. 14 to give the White House time to appeal to the Supreme Court, advisers like Schmick say the decision adds fresh uncertainty to an already fragile stock market.
“I have been expecting the possibility of a 4-to-7 percent pullback,” said Schmick, who is also a Berkshire Eagle business columnist. “Will this trigger that? It certainly could.”
Schmick and other local financial advisers are closely following the impact of the decision and what advice to give to people looking to invest. The first two weeks of September are a critical period for the stock market, Schmick said.
“If I were fully invested now and I’m a long-term player, [I would] prepare that [there] could [be] a decline in the immediate future,” Schmick said. “There is a yellow flag flying in the stock market.”
As of Tuesday afternoon, the Dow Jones Industrial Average fell 413.01 points or 0.8 percent, to 45,131.87. The S&P 500 dropped over 1 percent, and the tech-heavy NASDAQ fell 1.3 percent.
Tariffs reduce the deficit, Schmick said, adding that without them, deficits would continue to climb, which could play a role in the market being down.
“The actual declines that are happening today are no more than a little over 1 percent,” he said.
Allen Harris, CEO & Chief Investment Officer of Berkshire Money Management, follows seasonality trends and said Labor Day is a benchmark for the stock market. He said that September typically is “pretty weak” and that people can expect “some type of pullback.”
Allen Harris, CEO & chief investment officer of Berkshire Money Management, is among many local financial advisors closely following the impact of the federal appeals courts’ ruling against President Donald Trump’s tariffs. “How it plays out in the Supreme Court will matter less to the stock market and more to individual companies that import foreign goods,” Harris said.
A pullback is a brief decline in the generally upward price trend of a stock or other asset.
However, Harris said that the market had a strong July and August and that the numbers were “more than the historical norm.”
The most recent court decision focused on the reciprocal tariffs Trump imposed in April and other tariffs that were placed on China, Canada and Mexico. But the decision does not impact other tariffs — specifically aluminum and steel — which were authorized under different authorities, according to NPR.
Tariffs are taxes on imported goods and services that are imposed by a government. Trump’s tariffs currently range from 15 percent on goods from the European Union to 50 percent on goods from India, according to NPR.
Harris said the stock market has become “desensitized” to tariffs because the country has already reached peak uncertainty and chaos with the tariff implications.
“How it plays out in the Supreme Court will matter less to the stock market and more to individual companies that import foreign goods,” Harris said.
Trump has suggested he will take his fight to the Supreme Court, according to The New York Times. Schmick said he doesn’t think the Trump administration will look to rush a decision “as long as they’re allowed to collect the tariffs.”
If the Supreme Court were to rule no on the tariffs, things could “get dicey for the Trump administration,” Schmick said, adding that the administration is counting on the Supreme Court to rule in its favor.
Schmick said that Plan B for Trump would be to go through Congress and get approval from them on the tariffs, but that it would take time. He said investors are not concerned because the court case “could take forever.”
“Investors will wait and see until October what the [Supreme Court] says,” Schmick said. “The chess game moves onward.”
If the Supreme Court rejects the appeal, trade experts have said that the U.S. government could be forced to pay back some of the billions of dollars it has collected in tariffs, according to The New York Times.
Whether the U.S. has to pay back tariffs is not a factor Harris is considering when making investments for clients. Harris said he is focused on the Federal Reserve, which has hinted that it may make cuts in September.
Harris lives by the phrase, “Don’t fight the Fed,” coined by market strategist Martin Zweig, which looks at how central bank policy drives market direction. Harris said it’s important to keep an eye on what the Federal Reserve does, and that investors looking to buy should consider buying stock of companies “benefiting from the artificial intelligence wave.”
“If the Federal Reserve is cutting interest rates, you want to be on the side of that,” he said.
The tariff process will continue to drag out, Schmick said, adding that investors should not panic.
“The jury is still out on the whole tariff thing,” Schmick said. “We have a lot of drama to go through before it ultimately comes out in the wash.”