Inside Markets — Uncertainty Discount

Yesterday’s intraday recovery and today’s relatively strong tape are driven by concerns that tomorrow’s tariff announcement may not be as bad as feared. There is also the potential for tomorrow’s announcement to remove the uncertainty discount. While we do not expect tomorrow’s announcement to be a clearing event, it’s possible that a better than feared outcome could drive a short-lived rebound before an uncertainty discount is reestablished given the likelihood for retaliation/escalation before negotiation and some form of trade certainty sets in. Treasury Secretary Bessent recently mentioned that we could see trade discussions lasting until June, which fits our expectation for a more bullish pivot in mid-late Q2. The potential for an announced framework of a trade deal tomorrow with another G7 country (think UK) is a plausible bullish event that could allow markets to look through other tariff announcements.