WEEKLY MARKET SUMMARY
Global Equities: President Trump’s long-awaited “Liberation Day” tariff announcement triggered a meltdown in financial markets, dragging the S&P 500 down -9.1%. The Nasdaq Composite cratered -10.0% while the Dow Jones Industrial Average pulled back -7.8%. US small caps were down -9.6%. Developed International stocks fell -9.0% while Emerging Markets lost -7.3%. The global carnage was the worst market selloff since the 2020 Covid crash, and markets remained on edge heading into the weekend with reciprocation from targeted nations likely.
Fixed Income: Treasury Secretary Scott Bessent has stated getting the 10-Year Treasury yield down is a priority of the administration, and he got his wish this week, albeit at the cost of a stock market selloff. The 10-Year yield slipped under 4% before ending the week at 4.01% as investors ditched stocks for bonds. Odds of a rate cut from the Fed rose sharply, with Fed Funds futures markets indicating five rate cuts are now being priced in for 2025. Credit spreads widened out modestly on recession concerns, pulling down high yield bonds to a –2.1% weekly loss.
Commodities: US West Texas Intermediate (WTI) Crude prices cratered along with stocks, falling to $62.75 as of Friday afternoon on expectations of much lower global growth. Gold prices were steady most of the week but slipped on Friday to $3,050/oz.
WEEKLY ECONOMIC SUMMARY
Trade War Shocker: By most assessments, the Trump tariffs exceeded even the most extreme expectations, ranging from 10% to 50% and hitting 185 countries. The new levies were added on top of existing tariffs, bringing the tax on Chinese goods up from 20% to 54%. Not even the penguins of the uninhabited Antarctic Heard and McDonald Islands were spared, getting slapped with a 10% tariff. Trump also showed little interest in negotiations, igniting fears that the trade war will only accelerate as nations respond in kind. China immediately hit back with an additional across-the-board 34% tariff on US goods, tacked onto existing surcharges which were already as high as 102.5% on goods like US-made electric vehicles.
Powell Comments: Fed Chair Jerome Powell spoke on Friday, signaling concerns that the tariffs would reignite inflation at least temporarily while simultaneously hitting growth in a worst-case scenario of stagflation. Despite acknowledging these concerns, Powell stated the Fed would remain on the sidelines until it had more clarity. President Trump directly called on Powell to cut rates on his Truth Social media platform, while also sharing a video which opened, “Trump is crashing the stock market…this month, but he’s doing it on purpose”, implying that the tariffs were designed to sacrifice equity markets to force the Fed’s hand in bringing down interest rates and refinance the Federal debt.
Jobs Data: A strong March jobs report wasn’t enough to stem the bleeding from the stock market, as the backward-looking data wasn’t enough to calm investor fears about the future of the economy. US employers added 228,000 jobs during the month, while the unemployment rate ticked up to 4.2%. The healthy labor market gives the Fed some rationale to remain on pause, but as companies scale back investment due to higher input costs and general uncertainty, unemployment could rise substantially in a drawn-out trade war.
CHART OF THE WEEK
The Chart of the Week shows the projected average effective rate of Trump’s tariffs on US imports, which could end up being even higher than the Smoot-Hawley tariffs of 1930, which famously ignited a trade collapse that exacerbated the Great Depression. President Trump is either bluffing or betting that America’s economic strength and position as the world’s biggest consumer will allow the US to outlast its trade partners and achieve equitable trade agreements. Either way, the tariffs have introduced massive uncertainty into global markets and the duration of the trade war is a complete unknown at the moment.
