S&P 500 Could Tank To 4,000 If 'Trump Put' Fizzles, Says JPMorgan

The 90-day tariff pause announced by President Donald Trump‘s administration may offer temporary relief, but JPMorgan analyst Fabio Bassi warns that the macro backdrop remains fragile.

While countries that have not retaliated are spared for now, a 10% blanket tariff stays in place and tariffs on Chinese imports are jumping to 145%. That lifts the average U.S. tariff rate to around 30% – a significant economic headwind.

Bassi sees the recent move as a tactical timeout rather than a meaningful shift. Even under the unlikely scenario of China being removed entirely from the U.S. import equation, the average tariff rate would only fall back to the 10% level.

Pause, Not A Pivot As Recession Risk Looms

The size of the tariff-induced tax hike – estimated at over 3% of GDP – keeps recession fears alive. Bassi maintains a 60% probability of a U.S. and global recession. His 40% non-recession case hinges on a reversal of the China tariff escalation and a halt to further trade tensions elsewhere.

With sentiment weak and data mixed, macro headlines are set to dominate again. The so-called "Trump put," Bassi notes, was triggered by both a sharp equity selloff and a dysfunctional Treasury market, pushing the administration to ease up.

S&P 500 Faces Binary Path

JPMorgan has trimmed its S&P 500 year-end target to 5,200, but Bassi lays out a nearly binary risk-reward path. A drawn-out trade war could drag the index toward 4,000, while a meaningful trade breakthrough – with Europe, Japan and a softened stance on China – could launch a rally toward 5,800.

Investors in the SPDR S&P 500 ETF SPY, the iShares Core S&P 500 ETF IVV and the Vanguard S&P 500 ETF VOO should remain wary of their holdings.

In the meantime, he expects markets to remain range-bound, with any short-term bounce vulnerable to fading if not backed by real policy clarity or Fed support.

Global Hedges: China Tech, India In Focus

As U.S. risks mount, Bassi highlights select opportunities abroad. China tech remains investable, especially given the likelihood of aggressive policy support from Beijing. ETFs like the KraneShares CSI China Internet ETF KWEB and iShares MSCI China ETF MCHI offer exposure to that rebound theme.

India also gets a bullish nod, with potential policy tailwinds making it a compelling risk-on trade. U.S. investors may want to keep an eye on the iShares MSCI India ETF INDA as a way to diversify away from the choppy U.S. outlook.

Bassi's view is clear: the tariff pause is not a pivot. With macro risks still elevated and the market vulnerable, investors may want to hedge through global plays rather than rush back into the U.S. exceptionalism trade.

Read Next: