The market is confident that fundamentals can withstand tariffs, says Citi's Scott Chronert

Market Reaction to Tariff Developments - The market had become increasingly comfortable navigating tariff-related uncertainty and believed fundamentals could survive even with tariffs [3] - Initial expectations of stocks soaring due to potential tariff relief were not met, with stocks declining and yields rising [2] - The market faces a "catch 22" situation, weighing the potential earnings boost from tariff removal against the loss of tariff-related revenue offsetting deficit numbers [5][6] Tariff Impact on Companies - Companies reported varying tariff impacts, with some mitigating more than feared, while others experienced delayed effects [6] - Some companies initially expecting significant tariff costs have revised their estimates downward [7] - Retailers are finding they can pass some tariff costs to consumers through price increases, contrary to initial expectations [9][10] - Tariff implementation is following a company-by-company path, making aggregate conclusions difficult [9][10] Future Outlook and Uncertainty - The market will continue navigating the ongoing tariff drama for the foreseeable future [10] - Removing tariffs raises questions about whether companies will roll back price increases for consumers, potentially spurring more spending and inflation [11] - Tariff discussions are reinvigorating uncertainty at a time when the market is trading at 25 times trailing earnings, making it sensitive to disruptive news flow [13] - A potential tariff drag on S&P 500 earnings could be as much as 5%, but this has been mitigated by tax reform measures [4]