Weekly Market Insights | Markets React to White House Tariffs

Stocks fell broadly last week as domestic and foreign markets reacted to the White House’s tariffs. The Standard & Poor’s 500 Index declined 9.08 percent, while the Nasdaq Composite Index fell 10.02 percent. The Dow Jones Industrial Average dropped 7.86 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, lost 7.39 percent.^1,2

Under Pressure
Stocks rallied the first half of the week as markets tried to anticipate the potential impact of tariffs previously announced by the White House.³ Soon after the closing bell on Wednesday, President Trump’s new tariffs surprised markets. Global markets reacted to the news overnight.⁴ Markets opened lower on Thursday, and the selling continued through Friday. Treasuries rallied in a flight to quality as investors moved to the sidelines. The yield on the 10-year Treasury note closed Friday at 4.0 percent. Bond yields generally fall when bond prices rise.^5,6

^{Over the course of the last few weeks in these updates I have covered the Reagan economic reset and the Dow Theory flashing negative signals and we had a dramatic drop in equity markets last week and it appears that Monday’s stock market open will follow through on the end of last week’s stock market dump.}

^{Investors may be experiencing déjà vu as tariffs make headlines. The first Trump administration’s tariffs on China sparked a trade war that whipsawed markets and dominated the news, much like now. How did markets respond? Volatility rose in 2018, driven by the trade war and a slowdown in China’s economy, causing the S&P 500 Index to fall 4.4% for the year.}

^{However, the index recovered sharply in 2019,gaining 31% as trade deals were announced, and consumer spending remained steady. In both years, inflation was muted in the aggregate, with the annual consumer price index ranging from 1.50% to 2.85%. Granted, the world has changed since that initial round of tariffs with impacts of the pandemic, wars in Ukraine and the Middle East, and the greatest inflation shock in decades continues to ripple through the economy. How tariffs and federal spending cuts will play out, and reduction of corruption and the past theft from government coffers will affect growth is even more uncertain given the evolving nature of Trump’s policies.}

^{The lesson may be that in times like these, it is important to be clear about what we do and do not know, recognizing that tariffs are just one part of the equation. 
What we do know from past stock market drops is that ultimately the U.S. equity markets have proven to be remarkably resilient over time. Focusing on investment principles such as diversification and staying somewhat invested in the face of market volatility become more essential to achieving long-term investment goals.}

^{We actually have clients calling us about adding money to their accounts to buy this dip knowing that in the past the Fed succumbed to increasing political pressure for more interest rate cuts (Fed Put) and less quantitative tightening (QT) regardless of economic conditions leading to a stock market bounce. We also now have the “Trump Put” which would be moves to reduce the tariff uncertainties with Trump and other countries blinking and coming to terms. Something will eventually give if stock values continue tanking.} 

Powell’s Speech

Federal Reserve Chair Jerome Powell gave a previously scheduled and much-anticipated speech on Friday. He explained:

• The labor market is in good shape and not a significant source of inflation.
• Longer-term inflation expectations are “well anchored and consistent with our 2 percent inflation goal” – despite higher expectations for inflation over the short term.
• Regarding consumer sentiment, while consumers “may not feel great about the economy now, they still keep spending.” He added that the same happened during the pandemic.
• The Fed’s policy stance is “well positioned to wait for greater clarity… (on the likely effects of trade and fiscal policy, for example) before considering any changes in monetary policy.”⁷

^{Some bullish observations for the long term while equity markets continue to dump: 
The stock market is the only store in the world where people fear an asset that is lower in price and “on sale”! But not Warren Buffet who buys when there is “Blood in the Streets” and many savvy investors are hoping for a crash to swoop in and buy up great companies at bargain prices. The VIX (The S&P 500 volatility index or “fear gauge) is trading around 40 which is usually a more bullish indicator of market sell-off capitulation.}

^{However, we are witnessing a “global financial reset” with the tariffs and are sailing in unchartered waters. But on the plus side, mortgage rates falling towards 6% is bullish for housing and oil is also tanking towards $60 a barrel which is deflationary and will free-up more discretionary spending dollars for consumers.} 

^{It is very interesting that OPEC/Saudi Arabia are increasing oil production while the US dollar is falling which benefits emerging market economies as many emerging markets countries borrow in US dollars and a weaker dollar results in their local currency having more buying power relative to the dollar. Also, it is cheaper for Emerging Market countries to repay dollar-denominated debt and investors often look for better returns elsewhere like in EM equities or bonds.}  

^{There is a speculation circulating that Trump is crashing the stock market 20% on purpose to bring down interest rates in order to make lower interest payments on the 9.2 Trillion dollars of US debt coming due in 2025 which is pushing cash into US Treasury Securities giving the Fed better refinancing options to finance the gigantic US debt. Also, weakening the US dollar makes US goods cheaper to sell on foreign shelves and declining mortgage rates makes housing more affordable for Americans.} 

^{Tariffs forces companies to build more US plants and farmers to sell into US markets which will bring down domestic grocery prices. With regard to wealth transfer, 94% of all stocks are owned by 8% of Americans and some say that President Trump is essentially taking from the rich and transferring to the middle-class Americans through lower prices. Others speculate that Trump is playing Robin Hood and it is interesting that we can view Nancy Pelosi on YouTube espousing the same points on tariffs in her speech in 1996 as Donald Trump, Bernie Sanders and Barack Obama in other YouTube videos.} 

^{We have positive tariff news over the weekend that more than 50 countries have reached out to the White House to begin trade talks. Many countries are already at the table and on this Sunday, Taiwan’s President Lai Ching-te offered zero tariffs on US goods, pledging to remove trade barriers rather than imposing reciprocal measures and stating Taiwanese companies will raise their US investments! India, Israel and other countries are already onboard. . . . .} 

^{Also, UK Chancellor Reeves has expressed a cautious approach, stating that the UK will not rush into retaliatory measures to avoid jeopardizing potential trade deals with the U.S. and UK Prime Minister Keir Starmer will announce Monday the he understands the rationale behind Trumps tariffs - it appears dear reader that tea at the White House is imminent and I will gladly bring the crumpets – LOL!  Elon Musk speaking from an event in Italy Saturday stated he hoped for eventually a zero-tariff free trade zone between Europe and North America. Fingers crossed. . . .} 

^{OIL (Texas Tea) - looking beyond the recent relief rally in the energy complex, the fundamental backdrop for the oil market remains challenging for the bulls as there are 1) Somewhat easing geopolitical tensions overseas, 2) Looming production target increases from OPEC+. 3) Rising global economic concerns, which were underscored by the crash in consumer demand metrics in the EIA data. Risks of a physical oil market surplus emerging, and likely growing in 2025 leave the outlook for oil with an increasingly bearish bias towards lower prices. Oil is trading below $60 a barrel as of Sunday night!} 

^{Gold powered higher last week on the widely held sense of market uncertainty surrounding looming tariff announcements, increased trade-war tensions, safe-haven money flows and a month/quarter-end price chase higher as portfolio managers squared their books into the into the Q1 2025 end. Gold topped $3,100 a troy ounce for the first time and new highs offer the latest technical evidence that the primary trend remains higher for gold, while inflation worries and global trade tensions continue to drive historically elevated demand for safe-haven stores of value such as gold in early 2025. However, gold sold off on Friday on profit taking and money managers that needed to raise money for margin calls along with Berkshire Hathaway stock in the equity arena no doubt selling off for the same reason.} 

^{Debt markets - The US government is looking to reduce the elevated federal deficit through a combination of spending cuts and higher tariff revenues, but this goal conflicts with the simultaneous objective of extending 2017 tax cuts. Will the US be able to curb the deficit to Treasury Secretary Bessent's goal of 3% of GDP? No doubt, the projected one trillion dollar savings from DOGE exposing and thwarting corruption and theft from American tax payers will help in efforts to balance the US budget deficits.}

^{In the digital space - After the recent shifts in U.S. crypto policy, institutions seem to have sufficient confidence in the medium-term outlook to make sizable investments in the digital assets industry. During the month of March 2025, these resulted in a pickup in M&A activity, investments in stablecoins and asset tokenization, and other strategic investments. Of note, Bitcoin finished this past week higher in price and rallied on Friday while other risk-on assets like stocks tanked around the world. Also, the dollar continued its decline as it appears that some investors viewed Bitcoin as a store of value and alternative to fiat currencies, but Bitcoin has traded down to $78,000 over the weekend as of Sunday night.} 

^{Partner with a Certified Financial Fiduciary at Castle Financial - In these volatile and uncertain times, the biggest value of working with a seasoned advisor, acting as a fiduciary, is having someone to help control emotions and not get caught up in making bad investment decisions. Let's face it, when times are turbulent, emotions will often trump logic, leading to devastating financial decisions.}

^{Email julie@castlefinancial.com or call us at 732-888-4994 to schedule a complimentary 30 minute consultation and second opinion if you are not already a valued client of Castle Financial.}

This Week: Key Economic Data

Monday: Consumer Credit.

Tuesday: NFIB Small Business Optimism Index. Treasury Buyback.

Wednesday: Federal Open Market Committee (FOMC) Minutes released. 10-Year Treasury Note Auction. Wholesale Inventories. 

Thursday: Consumer Price Index (CPI). Jobless Claims. Monthly Federal Budget. Chicago Fed President Austan Goolsbee and Dallas Fed President Lorie Logan speak.

Friday: Producer Price Index (PPI). Consumer Sentiment. New York Fed President John Williams speaks.

^{Source: Investors Business Daily - Econoday economic calendar; April 3, 2025
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Friday: JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC), The Progressive Corporation (PGR), BlackRock (BLK), The Bank of New York Mellon Corporation (BK)

^{Source: Zacks, April 3, 2025. Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

"I never try to please a certain audience. I think that's disastrous."

– Charles Schulz

Get Educated on Education Credits

Two education credits are available to American taxpayers: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The IRS has lots of information about these two credits on their site, but here are some highlights you might find helpful:

• The AOTC is allowed for expenses for course-related books, supplies, and equipment not necessarily paid to the educational institution but needed for attendance.
• The AOTC is limited to four years, but the LLC can be claimed for as many years as you like.
• To claim either credit, use Form 8863.
• The AOTC is worth up to $2,500.
• Your modified adjusted gross income must be $80,000 or less to claim the full credit.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional. 

Tip adapted from IRS⁸

Healthy Roadtrip Snacks

Whether taking a short drive or heading off on a cross-country adventure, many families are packing up the car for some time away. 

One of the best parts about road trips? Snacks! They aren’t always the healthiest. Luckily, you can prepare many easy, healthier snacks for your trip. Skip the chips at the gas station and try these instead:

• Apples and peanut butter
• Celery and peanut butter
• Carrots and hummus
• Homemade trail mix with nuts and dried fruit
• Protein and granola bars
• Nuts and seeds
• Dried fruit and veggie chips

Tip adapted from Healthline⁹

I can certainly run, but I will never be able to walk by myself. Wherever I go, thoughts are close behind me. What am I?

Last week’s riddle: It can only be broken with force, yet it can be dulled by contact with a piece of paper. What is it?
Answer: A pencil.

Old Khajoo Bridge
Zayandeh River, Isfahan, Iran

Footnotes and Sources

^{1. The Wall Street Journal, April 4, 2025}

^{2. Investing.com, April 4, 2025}

^{3. MarketWatch.com, April 1, 2025}

^{4. The Wall Street Journal, April 2, 2025}

^{5. MarketWatch.com, April 3, 2025}

^{6. The Wall Street Journal, April 4, 2025}

^{7. MarketWatch.com, April 4, 2025}

^{8. IRS.gov, September 11, 2024}

^{9. Healthline, December 12, 2024}