Investing.com -- The market’s focus on tariffs is shifting away from negotiation headlines and toward real economic impacts, according to Lynx Equity Strategies.
"The tariff narrative could be moving away from the drama of negotiations and to their impact on supply chains," the firm said, noting that "the genie may be out of the bottle as supply chains react to tariffs."
Over the weekend, Lynx pointed out, "the phrase ‘supply shock’ finally made it to the front page of financial journals," reinforcing their earlier warnings that "the supply chains had ALREADY reacted to tariffs with an immediate reduction in the supply of goods."
The firm said that while investors were previously fixated on potential consumer price increases, "the Street woke up last week to the idea that [the] China tariff rate of 145% was causing a deep plunge in shipping volume out of China."
They added, "We expect the narrative of supply shocks to dominate the narrative this week."
Lynx cautioned that markets have yet to properly account for these disruptions.
"The Street has been focused on the drama of tariff negotiations rather than working out the mechanism by which tariffs corrode stock fundamentals," they said.
Even for goods not subject to tariffs, such as PCs and servers, "we think there is reduction in output," impacting supply chains across sectors, said Lynx.
The firm warned of weak guidance from major tech names, noting, "We do not expect the mega caps reporting this week to help the narrative."
They highlighted that "we expect tariff-related weakness at AAPL and AMZN" and predicted that a "meaningful update to the AI strategy at MSFT" could be "unhelpful to NVDA and related AI names."
Lynx concluded, "We expect semis and tech indexes to trade down."