Stock rally stalls on mixed tariff signals, Jefferies strategist warns worse may be ahead

US stock markets closed higher Wednesday with the Nasdaq up 2.5%, the S&P 500 up 1.7%, and Dow Jones up 1%. But the good times may be over, according to a veteran strategist.

Jefferies Financial Group’s Christopher Wood warns that equities, Treasuries, and the dollar could all face further declines in the months ahead. The head of global equities says diversifying into Chinese, Indian, and European assets could be an effective defense with expectation that these regional assets should rise.

“The US has made an all-time peak,” Wood said. “The dollar has begun a long-term weakening trend, and that’s going to reduce the US stock market capitalization as percentage of the world.”

US stock market futures are signaling a lower open for the three main indexes, each off by around three quarters of a percentage point as of 5am ET Thursday.

Investors are again trying to weigh the direction of travel for the Trump administration with conflicting signals from the president, who had said earlier that he wants to ‘be nice’ to China, and trade secretary Scott Bessent who sounded less optimistic of a timely deal, while Beijing denied talks were underway.

“The danger of trading off the headlines is that the commentary changes on a daily basis and later on there could be a different narrative,” Brent Schutte, CIO at Northwestern Mutual Wealth Management told Bloomberg. “There’s quite a bit to go before we get to whatever the outcome is of the trade tariffs. You have to look at when do you actually see the impact start hitting US shores.”

As a stark illustration of how overweight exposure to US equities can hit a portfolio hard, the world’s largest sovereign wealth fund, Norway’s Norges Bank Investment Management, reported that it had lost $40 billion in the first quarter of 2025. US assets make up 55% of its portfolio with less than 5% each held in several other major economies such as Germany, France, UK, and Canada.

“The quarter has been impacted by significant market fluctuations. Our equity investments had a negative return, largely driven by the tech sector,” said CEO Nicolai Tangen in a statement.