President Trump's 100 days. 70 days of whip saw trading in financial markets. 33 days of loss. Over $6.5 trillion has been wiped out of the value of public companies.
In the case of the financial markets, the 9% decline in the S&P 500 is on track for the worst start to his presidency, as Gerald R. Ford took over from Richard M. Nixon in August 1974 after the Watergate scandal. The slump was worse than when the high-tech bubble burst at the turn of the century, and George W. Bush had already inherited the market in free fall.
In contrast, Trump inherited a solid foothold and stock market economy from a high record to another.
That changed quickly when Trump announced his marquee suite on April 2nd. Volatility exploded. Wall Street began desperately working on the economic impact of the new government's policies.
The S&P 500 fell over 10% in two days. This rivaled some of the worst days of the pandemic-induced sell-off in March 2020, and before that, the 2008 financial crisis.
Inventories have since been stable, but shock waves from the untidy tariff development continue to send tremor through the global financial system.
Some investors have questioned the role of the US at the heart of its financial system and the safety of US assets during periods of market turmoil, threatening long-standing market order.
There are still optimists who realize that market turmoil appears to have ultimately urged Trump to return to his steepest tariffs. But for many investors, trade deals, tax cuts, and even hopes of deregulation, a return to more business policies on the president's agenda – remains plagued by pure uncertainty about what will happen next.
“This is a very unstable situation,” said Michael Purves, Chief Investment Officer at Tallbacken Capital.
Promise for future prosperity
It didn't begin like this.
A month after Trump's term, the S&P 500 hit a record high. Investors were encouraged by the unlimited possibilities of artificial intelligence and the new president who campaigned on the Growth Promotion Agenda.
Trump addressed the Institute for Future Investment Initiatives in Miami on February 19th, ensuring investors future economic prosperity.
“Under a certain president named Donald J. Trump, there is no better place on the planet than the current and future United States of America,” he said.
Investors were ecstatic. “There was a huge amount of optimism in the air,” said Todd Ahlsten, chief investment officer at Parnassus Investments, adding that “there were few warning signs on the horizon.”
However, within a day of Trump's speech, concerns about inflation began to be strained by the market, intensifying with the announcement of 25% tariffs in Mexico and Canada at the beginning of March. Economists expect customs duties, a tax on imports paid by importers, to increase prices for consumers and businesses.
Investors who once believed Trump's aggressive campaign was talking about trade imbalances were not a policy, but suddenly faced a new reality. The president was serious about imposing tariffs and he was willing to risk a sale in the stock market to achieve his goal.
Investors weren't ready for what came next.
“The Great Change in Paradigm”
The announcement of double-digit tariffs worldwide has led to the worst two-day sale of the S&P 500 since March 2020. The difference this time was that the slides responded directly to government policies.
“We're looking forward to seeing you in the world,” said Mohamed El-Erian, former CEO of Pimco, Queen's University, Cambridge University president and one of the world's largest asset managers.
Economists have begun to sound warnings that an economy, which had steadily slowed employment growth as inflation cooled, is now heading towards a much more sharp recession. The administration once again shrugged off the stock slide. Investors were in a hurry to protect their portfolios from further losses.
“After the US economy was praised for its economic exceptionalism, it has become a concern that it has fallen into a stag or a recession,” Dr. El Elian said. “It's a major change in the world's most important economic paradigm.”
For a week when tariffs are expected to take effect, both the high-tech NASDAQ composite index and the small business Russell 2000 index tend to be more of a barometer of economic outlook than much larger multinationals — had fallen into the BEAR market.
The bear market is rare, where the index drops 20% from the peak. When it occurs, it is a marker of extreme investor pessimism. In this case, analysts and economists say they are crossing the direction of the economy in response to tariffs. It's a line in the sand for a sellout that turns into a sustainable down market.
When the market closed on April 8th (the day before tariffs came into effect), the S&P 500 was 18.9% below its February peak. The next morning, as tariffs came into effect, Trump announced a 90-day suspension of tariffs, the most punitive tariffs in all countries except China. The S&P 500 recorded its highest day since 2008, with stocks recovering.
There are alarm bells throughout the financial system
But it wasn't the stock market that Trump said he had blinked.
That same week something strange happened in both the bond and currency markets. Typically, in times of chaos, investors around the world are seeking US assets as a source of reliability and security. They buy dollars and US government debt, usually boosting their respective value.
That's what happened when the stock market first fell. However, in the days leading up to tariffs, both the dollar and the US government bonds began to fall, setting an alarm on Wall Street.
Traders explained a sense of panic and fear as prices fell and sent surges of yields.
Treasury debt for 30 years began the week with just over 4.3%. In overnight transactions before the tariffs came into effect, yields (indicates the cost of borrowing by the US government) exceeded 5%. This was a major move in the market, which usually travels 100th of a point every day.
“The bond market needs to be very careful,” Trump said.
Traders pointed to technical thresholds compromised in the bond market, causing the kind of sale from a variety of computer-driven trading strategies that automatically buy and sell based on preset programming.
The sale then attracted momentum, with some analysts saying the unusual move is a sign that investors are souring US assets amid the chaos caused by tariffs.
US exceptionalism is rooted in the notion that the US plays a central role in global financial markets. There, the dollar is the reserve currency, and the national debt is borrowed domestically and internationally. Analysts say the concept has become vulnerable.
Amidst the chaos, Trump has also stepped up attacks on people and institutions that support US exceptionalism, including Jerome H. Powell, chairman of the Federal Reserve, which supports investors' trust in the US market.
The president was unhappy with Powell's failure to lower interest rates, but the latter warned that doing so could drive further inflation. Many investors also crave lower fees, but it's more important for them to maintain their independence.
More “yo-yo” tariffs?
Since April 9th, the government's tone has changed.
Authorities are encouraging people to say that there is active trade negotiations behind the scenes.
Even when, as in China, the administration's claims were rejected as supplemented, investors are getting clues that the White House is trying to cheer on the market.
Still, few are willing to be willing to bet on what will happen next.
One of the US Bank's bond banks said his team has not made trading decisions for a period of up to six months, as it did last year. Instead, uncertainty forced the uncertainty to make weekly decisions, relying heavily on the levels of tariffs that may not be known for weeks or months.
Economic data will be closely monitored for signs of tariffs being established. The profit report continues to close on signs that tariffs are colliding with Main Street.
A 90-day suspension will then be held in July and with tariffs and market meltdowns pending.
“As the administration quickly eases tariff policies and tariff uncertainty wanes, permanent damage may be modest or negligible,” said James Egelhoff, an economist at BNP Paribas. He said he is spending more time with clients on what a potential economic downturn would look like if tariff uncertainty persists.
“If tariffs act like yo-yos and continue on the course that has risen and then rise again, this uncertainty remains unabated and has a paralyzing effect on businesses, especially the case,” he said.
Again on Wednesday, Trump pushed the current market turmoil away by his predecessor.
“This is not Trump's stock, it's Biden's stock market,” Trump wrote of the true society. “I didn't take over until January 20th. The tariffs started kicking right away, and businesses are beginning to move to America in record numbers.”
“Put it out!!' he added.
