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Dan Ives and I don't always see eye to eye, but he called it here. “President Trump just finished his tariff speech at the White House and we would characterize this slate of tariffs as ‘worse than the worst case scenario’ the Street was fearing.”
It was a bad week. I guess I should have saved my 'volatile ends' title from last week for this week.
Financial Highlights
Markets were stupefied this week after President Trump announced a sweeping and aggressive new tariff plan set to begin April 5. All imports into the U.S. will face a minimum 10% tariff, with reciprocal tariff rates as high as 50% for certain countries with significant trade deficits. China, which was assigned a 34% reciprocal tariff, already had a 20% base rate for a total of 54%. In response, China swiftly matched with a 34% retaliatory tariff. The U.S. average tariff rate is now expected to skyrocket from 2.3% to as high as 25%, marking the steepest increase in over a century.
The market reaction? Swift and sharp. Stocks had their worst week since March 2020, with the S&P 500 and Russell 2000 each plunging over 10% in two days. Tech giants like Apple and NVIDIA suffered but it was many consumer companies that were hurt the most. Bond markets rallied on the risk-off sentiment, driving the 10-year Treasury yield below 4% for the first time since October. Meanwhile, gold and crypto saw early losses but crypto managed to claw back some ground by the week’s end.
Economic indicators painted a mixed picture, but it was all painted red anyway. Economic reports that would normally be positive catalysts, such as the expectations-beating payrolls (+228k), became largely irrelevant in our new trade regime. Manufacturing activity slid back into contraction, and the ISM’s prices index jumped due to tariff-induced cost pressures.
Fed Chair Powell emphasized caution, noting that higher inflation and slower growth are likely, but the full impact remains uncertain. He also hinted that the Fed has room to cut rates if needed but remained firm that the FOMC is in no rush to cut rates.
Despite the chaos, we enter this period from a position of relative economic strength. However, there is no sugar-coating the danger these tariffs will pose to the global economy. Businesses have only begun to digest this information, and poor earnings and guidance will send stocks lower still.
What This Means for Investors
Volatility like this is terrible, but it is unfortunately part of the ride. Long-term investors should stay the course, avoid emotional reactions, and lean into diversified, quality-focused portfolios. There is no need to go it alone. Talk to a friend, family member, or best yet: Talk to a professional financial advisor who has seen this and helped other navigate it. Storms like these will pass but missing the rebound days can cost you dearly. Diversification continues to prove its value in 2025, with international stocks U.S. bonds, and commodities helping offset domestic equity losses.
Market Activity
S&P 500 companies -$5T since Wednesday’s close. A new record 2-day loss 🎉.
Stocks
What a bloodbath. Even gold couldn’t hold up this week. Bitcoin remained surprisingly steady, but as a risk asset it could blow with the wind at any time. As margin calls roll through the market, selling pressure will mount on everything.
With so much unknown, the only thing we as investors can do is re-anchor to the principles of good long-term strategic asset allocation. Maintain a diversified portfolio, rotate and rebalance as your portfolio breaches its exposure guardrails, and reallocate as necessary to align with your goals, risk capacity, and risk tolerance.
This is uncomfortable, this is not over, and investors need to focus on rules-based strategy. If you want to be a buyer, don’t accept major risk for minor opportunities. There is no good rubric for scooping up individual company “deals”, when we haven’t seen trade policy like this is a hundred years. Predicting company-level reactions will be nearly impossible day to day, so focus on the bigger picture of sectors and country exposure.
Consumer discretionary fell the least on Friday, probably already beaten up enough.
Fixed Income
Long rates took a dive this week on a flight to safety during all the tariff chaos. Given the administration’s focus on the 10-year, this may be a secondary goal of the trade shakeup. Is a $5T loss in equities worth the trade for 30 bps? Or did they think it would go much lower?
The dollar has not shown the strength it usually does during increased tariffs and this is indicative three possible factors:
- Foreign nations likely avoiding US investments since we are the locus of the chaos. If treasuries aren’t used as the safe-zone anymore, rates will not fall as much as expected and the dollar will weaken.
- The bond market (and Fed) expect higher inflation which is propping up rates due to the concern of future breakeven investment returns.
- Currency and bond markets expect retaliatory tariffs which would offset our unilateral (and dollar strengthening) tariffs.
2-, 5-, 10-yr dropped sharply
Economic Reports
This Week
None of this mattered this week. Non-farm payrolls were above expectations and more people were coming into the labor force but it sure didn’t matter to the market.
This Week
CPI is going to be extra important going forward, and unfortunately, this release is probably going to be the lowest in the while.
Earnings Releases
This Week
Earnings are certainly important, but it is future guidance that will steer the ship this month. It’s probably going to be very ugly, starting with Constellation Brands which is the biggest beer import company in the US with the best selling beer in the US. Bud Light might have another shot at the title after all.
Banks et al. are going to be full of fireworks on Friday. I hope my boy Jamie lets loose.
Recommendations
Calm and Relaxation
Portfolio Management
Josh Brown on managing through bear markets and sequence of return risk | This is the way. Ritholtz is one of the best in the biz and are bringing amazing financial content to the masses. They also know their stuff.
Chart(s) of the Week
Many analysts poured over the possible calculations for these and it turns out it’s as simple as 2+2=Tariff. Here it is: [Trade Deficit / Imports] / 2 = Yellow Box
This is not even close to how tariffs should work
It’s not too late to diversify. This isn’t over and even if US stocks rally Monday on the news that this was all a joke, you’ll be better positioned for the future.
Source: FactSet, Edward Jones. Total return in USD through 4/3/2025
Sentiment is not a good predictor of short-term returns. But it is if you buy when its at its worst and hang on tight.
Source: Creative Planning, Peter Mallouk
26B shares changed hands on Friday. Thursday was the largest day of net buying by retail investors in history ($4.7B). Prior to noon Friday, retail investors were net sellers to the tune of $1.5B, again the most ever. I don’t know the number after that but it didn’t get better.
