Tariff developments continued to dominate headlines. On Wednesday, Donald Trump announced a 90 day pause on most reciprocal tariffs except for those against China. Trump’s move led to one of the most explosive single session rallies in Wall Street history. The S&P soared more than 9% to log its best intraday performance since the financial crisis in October 2008. Not to be outdone, the Nasdaq Composite skyrocketed more than 12% to notch its second best day ever. For the week, the S&P jumped 5.7%, while the Nasdaq Composite advanced 7.3%. The Dow gained 5%.
And in another unexpected turn of chaotic events that has become the norm under this administration, after the market closed on Friday, Trump announced that smartphones, laptop computers, memory chips and other electronics will be exempt from reciprocal tariffs – another step back that could ease some consumer concerns about an immediate jump in costs for tech products imported from China. The reprieve was the latest twist in a turbulent week for U.S. trade policy and could benefit companies such as Apple, Samsung, HP, Dell Technologies and Microsoft that manufacture electronics outside the U.S. The change could effectively erase the latest tariffs that were imposed on many consumer electronics.
Of course, the risk remains that if any of the tariffs were to persist, they could undo decades of globalization that have been instrumental in reducing costs for American consumers.
Future Wealth’s View
While Trump continues to impose tariffs and roll back some of them, investors are bewildered on where to invest going forward. Despite the rollbacks from last week, the S&P 500 is still down 8.8% YTD and the Nasdaq is down 12.12% YTD. One only needs to look at the Bond Market for the unsettling clues on the damage that Trump has done. Billed as risk free investments, US Treasury bonds have long been the go-to asset for investors during times of panic. They rallied during the global financial crisis and again, on 9/11. As President Donald Trump unleashes an assault on global trade, their status as the world’s safe haven is increasingly coming into question. Yields, especially on longer term debt, have surged in recent days while the dollar has plunged. Even more disconcerting is that investors have dumped 10 and 30 year Treasuries—pushing prices down and yields up—at the very same time they frantically sold stocks, crypto and other risky assets. It is widely feared that foreign countries that hold trillions of US Treasuries could unload them driving yeilds even higher in the coming months.
The uncertainty in the markets will likely persist as Q1 earnings from all the major US companies get under way next week. While we expect the stock market to trade higher near term on the tariff relief provided for smartphones and other electronics, the volatility in the market suggests a quick reversion may not be far away.
It behooves investors to look beyond the tariff rally and examine the long term impact of Trump’s mercurial policies that could weaken the dollar, shift the global order, undermine America’s superior technology prowess and represent a major breakdown of democracy in the United States. The resumption of a bull market will not fix any of these catastrophes.