Markets enjoyed a nine day rally this week, before pausing amid mixed signals around tariffs and earnings. While certain sectors continue to show strength, global trade relations present a complex picture, with both advancements and ongoing tensions.
Wall Street on Friday ended marginally lower for the week. The Fed’s monetary policy committee on Wednesday kept the key federal funds rate unchanged. It also warned of the possibility of higher inflation and higher unemployment.
The big news of the week was a trade deal with Great Britain. Trump also expressed optimism that China wanted to make a deal, ahead of talks between Treasury Secretary Scott Bessent with Chinese representatives in Switzerland.
For the week, the S&P slipped 0.5%, while the Nasdaq Composite shed 0.3%. The Dow fell 0.2%.
Future Wealth’s View
The stock market is hoping to achieve a significant cut to its China tariffs – to levels well below from the current level of 145%, to de-escalate tensions. But, even before Scott Bessant boarded the flight to Switzerland to begin negotiations with the Chinese government, Trump undermined his Treasury Secretary by tweeting “An 80% tariff with China seems right!”. How he came up with 80% is about as puzzling as the 145% that he threw out on April 2nd and put the entire global economy into chaos.
In the meantime, the world is watching. India launched a war on Pakistan. North Korea is sending more troops to Russia. Russia is ignoring the US and continues to pound Ukraine. Israel is also ignoring the US and is planning to take over the Gaza strip. China is exporting more goods to other countries even as its exports to the US drop off precipitously. Europe has decided that the US is no longer a reliable partner and has begun to make more investments in developing its own capabilities. Bottom line is that the US is increasing not a part of the global conversation.
In many ways, this is like a bad movie slowly unfolding before our eyes. With an incompetent President surrounding himself with sycophants who have limited to no experience in government, the country has been handed over to the wills of an unpredictable and vindictive individual for the next four years. The Fed and the stock market are attempting, in vain, to stay with the script but, one by one, the companies that make up the stock market have relented to the uncertainty that lies ahead and the Fed is soon to follow.
These are not times to take big risks, even well researched stock ideas could be hammered needlessly.