he S&P 500 index has now notched seven negative weeks out of nine, as tariff developments continue to sour sentiment. The U.S. and China’s trade war continued to heat up after chipmakers Nvidia and AMD disclosed billions in inventory write offs due to the tariffs. The updates, along with a weak quarterly bookings performance by Dutch chip equipment manufacturer ASML, led to a tech rout and contributed to the majority of the week’s overall market losses. Netflix results were the only shining light.
Jerome Powell at the Economic Club of Chicago, expressed concerns about the likely increase in inflation from tariffs. Trump later criticized him for not lowering interest rates, and has been said to be mulling over whether to remove Powell. For the week, the S&P retreated 1.5%, while the Nasdaq slid 2.6%. The Dow fell 2.7%.
The big drag on the stock market is tariffs on China. China wants to see a number of steps from Donald Trump’s administration before it will agree to trade talks, including showing more respect by reining in disparaging remarks by members of his cabinet. It is highly unlikely that China will get the respect that it wants – not from this administration. Perhaps hoping to bluff his way to a win, Trump has said he’s waiting for Xi Jinping to call him. But, the Chinese leader has shown an unwillingness to back down. China has in fact been publicly adamant, going so far as calling Trump’s tariffs a “joke.” At this point, the levies on both sides are so high that trade between the world’s two largest economies is effectively about to halt.
Future Wealth’s View
The trade war continues to rattle global markets. Each new policy move fuels fresh volatility and has investors bracing for impact. Navigating this turbulence requires a clear strategy and a steady perspective. Powell’s comments this week are not to be taken lightly – Powell said “the level of the tariff increases announced so far is significantly larger than anticipated” and that the lingering uncertainty around tariffs could inflict lasting economic damage.
The damage that Powell is referring to will take a long time to heal. Other countries are unlikely to jettison the benefits of economic relations with China to join a crusade with Trump at this point. Many feel that the Trump administration has a fundamental misunderstanding of the global economy. Realistically, global manufacturing is never going to come back to the US. The idea was to punish China with higher tariffs while the rest of the world cut favorable trade deals with the US. But with his bullying accompanied by stiff tariffs, countries are reluctant to view the Trump administration as a reliable partner. Europe has already resumed talks with China. China could likely find a substitute for some of the demand that it would lose from the US elsewhere. However, the US could struggle to replace the inputs from China.
We are at a moment in time that will likely become the topic of several books on economic mismanagement by the most powerful country in the world. While this plays out, we choose to remain on the sidelines and stay safe across all our client portfolios. This is no time to try to be a hero.