NEW YORK (Reuters) -U.S. President Donald Trump's scheduled April 2 tariff policy announcement could clear a fog of uncertainty that has clouded financial markets this year, yet few investors expect to get the definitive guidance they seek.

Investors entered 2025 bullish about pro-growth government policies under Trump, but instead the stock market has swooned since his inauguration. Headlines on tariffs whipsawed Wall Street, knocking the S&P 500 as much as 10% earlier this month.

The benchmark index is on pace to finish the first quarter down about 5%, its biggest decline for the first three months since 2020.

"I'm an eternal bull, but I would tell you that I think that between now and next week, and certainly the beginning of earnings season, I think there's more potential downside than upside right now," Mark Malek, Chief Investment Officer at Siebert Financial said.

The benchmark index tumbled about 2% on Friday after data showed U.S. consumer spending rebounded in February amid rising prices for goods and services. The market slide highlights investors' sensitivity to any sign Trump's protectionist trade agenda could reignite inflation.

The April 2 tariff announcement should reveal which countries and sectors the Trump administration will target as it tries to reduce a $1.2 trillion global goods trade deficit.

Heavy volatility is expected, with stock prices swinging wildly on factors such as how steep the tariffs will be, their duration, which countries and sectors they will target and any retaliatory measures from trading partners.

"Uncertainty has continued to plague the market with volatility," said Michael Arone, chief investment strategist for State Street Global Advisors.

"There is potential for more volatility on April 2 and post that deadline," Arone said.

On Thursday, governments from Ottawa to Paris threatened retaliation after Trump unveiled a 25% tariff on imported vehicles, hammering auto stocks and testing already strained ties with allies.

The April 2 announcement is likely "not a one-and-done event," said Angelo Kourkafas, senior investment strategist at Edward Jones.

"It is an important milestone, but at the end of the day, it doesn't completely really clear out all the uncertainties that potentially still remain," Kourkafas said.

ALL SPINACH AND NO CANDY

The market reaction on April 2 "will depend heavily" on timing for future tariffs, especially sectoral tariffs, and how fast other countries could retaliate to reciprocal tariffs, said Matthew Aks, senior strategist at Evercore ISI.

"If other countries retaliate, that will create the risk of an escalatory cycle that could dampen any feeling of relief," he said.

On Wednesday, strategists at Barclays slashed their 2025 target price for the S&P 500 to 5,900 from 6,600, based on an expectation that earnings take a hit as tariffs feed a material slowdown in U.S. activity that stops short of recession.

The bank trimmed its 2025 S&P 500 EPS estimate to $262 from $271, implying moderately below-trend growth, due to a hit from tariffs, with discretionary stocks among the most vulnerable.

On Friday, UBS Global Wealth Management cut the S&P 500's 2025 target to 6,400 from 6,600 and trimmed 2025 S&P 500 EPS forecast by $5 to $265.

The risks are not all to the downside. The recent stock selloff could tempt buyers should the administration's tariff moves fall short of the market's worst fears.

"I don't think there's anything that would happen that would surprise the market to the downside," said Harris Financial Group Managing Partner Jamie Cox, who would view any fresh bout of weakness as a buying opportunity.

Some said the tariff deadline could allow Trump to pivot to more market-friendly policies, including tax cuts.

"I think they're going to start shifting gears and move from tariffs," Robert Pavlik, senior portfolio manager at Dakota Wealth, said.

"That won't go away completely, but there will be more emphasis on the tax talk. That's what I'm hoping for."

That could drive a rebound in investors' appetite for risky assets.

"It's been all spinach and no candy so far, but I think the candy is likely coming later in the year," State Street's Arone said.

During Trump's first term, stocks took a tumble as a U.S.-China trade war heated up with the S&P 500 shedding about 18% between January and December 2018. The index went on to recover all the lost ground within about three months as trade war concerns eased.

Still, investors worry that an extended back-and-forth on tariffs boosts chances for lasting damage to the U.S. economy. U.S. consumer confidence plunged to the lowest level in more than four years in March, as investors worried more about a recession and higher inflation due to tariffs.

"I have not seen movement in confidence like this that has not had some negative impact somewhere," Siebert's Malek said.

The stock market's recent bout of nerves is largely driven by concern that tariffs would significantly weaken the economy, said John Canavan, lead analyst at Oxford Economics. Some recent weakness could spill into the second quarter, Canavan said.

Uncertainty on tariffs has so far discouraged investors from buying shares at a discount following Wall Street's quarterly decline.

"Getting greater clarity will allow markets to move higher," State Street's Arone said.

"I am still skeptical that will get that clarity ... we are hoping for it, but we will see," he said.

(Reporting by Saqib Iqbal Ahmed and Lewis Krauskopf; Additional reporting by Carolina Mandl; editing by Megan Davies and David Gregorio)