How Tariffs Are Shaping Investor Expectations

Right now, investor sentiment in the US is cooling dramatically in the wake of US tariffs hikes on virtually all its trade partners.

New BCG research found that just 20% of investors described themselves as bullish on the economy and stock market for 2025—compared with 65% in November 2024.

A majority (55%) now reported the US will enter recession this year, a 19 percentage-point jump in just two weeks and triple the level of last November.

Nevertheless, most investors indicated that it’s important for companies to meet their near-term earnings guidance while making the investments needed for longer-term growth.

The So What

“The pace, uncertainty, and impact of the new US tariffs are unprecedented,” says Marc Gilbert, a BCG managing director and senior partner who leads the firm’s Center for Geopolitics. “And more changes are coming, both from the US and its trading partners.”

BCG surveyed 150 US investors three times over the past five months (from November 8 through November 10, 2024; March 24 and March 25, 2025; and April 8 through April 9, 2025) as part of our ongoing BCG Investor Perspectives series. Note that most people responded to the most recent survey before the US paused its reciprocal tariffs on most countries and other policy developments that are reshaping global trade.

What we found:

• Asked to name the three biggest macroeconomic risks, 55% of respondents cited stagnating world trade, up from 26% in November 2024. Consumer price inflation and sentiment was cited as a top risk by 53% of respondents.
• Investors were surprised by the scale and breadth of US tariffs; 74% said they didn’t anticipate the tariff rates would be so high, and 82% didn’t expect tariffs would be imposed on so many countries.
• Investors overwhelmingly expected the new tariff regime to negatively impact both consumers and corporations. More than three-quarters anticipated that tariffs will drive up consumer prices and weaken spending; 69% and 72% of investors expected a negative impact on corporate revenues and margins, respectively.

The following are key findings related to US equities and listed companies:

• Even after the recent market correction, 62% of investors thought the S&P 500 index is still overvalued; on average, investors expected the index to decline another 10%.
• Forty percent of investors viewed the recent correction as indicative of a long-term trend; 27% anticipated a bear market and 13% a rotation across industries and sectors. Only 32% viewed the sell-off as short term.
• The share of investors expecting tariffs to hurt corporate revenues rose from 59% in March to 69% in April, while those predicting a negative impact on margins increased from 53% to 72%.
• Investor expectations of companies remained high, however. Eighty-one percent still expected them to meet or exceed their near-term earnings guidance; 76% said it’s important that companies maintain dividend payouts at or above historic levels.

Now What

Even in this extremely challenging climate, companies will remain under pressure to deliver near-term shareholder returns.

“Despite all the economic and geopolitical risks, investors aren’t giving companies much leeway,” says Jeff Kotzen, a BCG managing director and senior partner who leads the firm’s shareholder value advisory topic. “Preserving margins and building supply-chain resilience are now as important as ever.”

Companies must continue investing to meet investors’ expectations for growth and protecting revenue, also a top-three priority of most respondents. In the survey, 87% of investors agreed companies should prioritize building key business capabilities. Investor support for corporate dealmaking has slipped, but remains strong, with 73% saying they back tuck-in acquisitions and 57% support transformative deals. They’re also paying closer attention to corporate debt levels: the share of respondents reporting they avoid companies with net leverage higher than three times EBITDA rose from 59% to 73% since November 2024.

“Investors want it both ways,” Kotzen says. “They want short-term performance and discipline but also demand long-term value creation through thoughtful capital allocation and active portfolio management."

Meeting investor expectations requires a comprehensive strategy that will position the company to succeed under different scenarios and robust capabilities to navigate rapid developments in trade policies in the US and globally. Companies must be able to master trade compliance, reconfigure supply chains, a build the geopolitical muscle to stay ahead of new developments. Many companies will also have to quickly adapt their commercial approach, including pricing and product portfolios.