The stock market’s response during the Cuban Missile Crisis could provide a template for how investors will react to President Donald Trump’s upcoming reciprocal tariffs, according to Tom Lee, co-founder of Fundstrat Global Advisors. Lee has a strong track record of predicting stock market trends.
A recent sense of dread among investors is driven by fears that punitive tariffs will drive several economies into recession. However, Trump’s suggestion of “flexibility” with his reciprocal tariffs could indicate a less severe approach, potentially leading to some relief.
Lee drew parallels between the Cuban Missile Crisis and today’s situation. The crisis was eventually resolved through diplomatic efforts, which led to a stock market bottom seven days in and subsequent recovery. Lee believes this history could provide a roadmap for how investors might respond to Trump’s tariffs.
While top investors like Cathie Wood warn of a recession, Lee argues that the market isn’t signaling one. Instead, investors are more paralyzed than pessimistic. He predicts a big stock rally after April 2, which could even help stave off a downturn.
Lee also believes that a successful trade deal could blunt future issues related to trade and make the US more attractive again. His recent predictions have included a 10%-15% jump in stocks this spring, with the S&P 500 and Nasdaq already climbing about 3%. The market has also made its first weekly gains after four consecutive declines, thanks in part to Fed Chair Jerome Powell’s dovish tone.
Lee believes that increasing signs of a tradable bottom have emerged, suggesting that the market is on the path to recovery.
Source: https://fortune.com/2025/03/23/stock-market-outlook-trump-reciprocal-tariffs-rally-bottom-recession