April 4, 2025

I had said yesterday that let us hope that the new Trump tariffs would not bring about bring about he had called “Liberation Day” would not “Liberate” investor money from themselves, but at least for one day this was an incorrect assumption as the market underwent a historic day of massive downside crashes.

‍

The level of crashes was unseen since COVID’s outbreak tore through financial markets worldwide on Thursday on worries about the damage that the President’s newest set of tariffs could do to economies across continents, including his own.

‍

The S&P sank by 4.8%, more than in major markets across Asia and Europe, for its worst day since the pandemic crashed the economy in 2020. The Dow dropped 1,679 points, or 4%, and the Nasdaq composite tumbled 6%. The S&P and Nasdaq underwent their worst one-day collapses since June and March 2020.

‍

Little was spared in financial markets as fear flared about the potentially toxic mix of weakening economic growth and higher inflation that tariffs can create.

‍

Everything from crude oil to Big Tech stocks to the value of the U.S. dollar against other currencies fell. Even gold, which hit records as investors sought something safer to own, got dragged lower. Some of the worst hits walloped smaller U.S. companies, and the Russell 2000 index of small stocks dropped 6.6% to collapse more than 20% below its record.

‍

Investors worldwide knew Trump was going to announce a sweeping set of tariffs late Wednesday, and fears surrounding it had already pulled the S&P 500 index, 10% below its all-time high. But Trump still managed to surprise them with “the worst case scenario for tariffs,” according to one prominent market observer.

Trump announced a minimum tariff of 10% on imports, with the tax rate running much higher on products from certain countries like China and those from the European Union. It is “plausible” the tariffs altogether, which would rival levels unseen in roughly a century, could knock down U.S. economic growth by 2 percentage points this year and raise inflation close to 5%, according to a prominent brokerage house.

‍

Trump has previously said tariffs could cause “a little disturbance” in the economy and markets, and on Thursday he again downplayed the impact as he left the White House to fly to Florida.

‍

“The markets are going to boom, the stock is going to boom and the country is going to boom,” Trump said.

‍

Investors had long assumed that Trump would use tariffs merely as a tool for negotiations with other countries, rather than as a long-term policy. But Wednesday’s announcement may suggest Trump sees tariffs more as helping to solve an ideological goal rather than as an opening move in a poker game. Trump on Wednesday talked about wresting manufacturing jobs back to the United States, a process that could take years.

‍

Trump offered an upbeat reaction after he was asked about the market’s drop as he left the White House to fly to his Florida golf club on Thursday.

‍

“I think it’s going very well,” he said. “We have an operation, like when a patient gets operated on and it’s a big thing. I said this would exactly be the way it is.”

‍

One wild card is that the Federal Reserve could cut interest rates in order to support the economy. That is what it had been doing late last year before pausing in 2025. Lower interest rates help by making it easier for U.S. companies and households to borrow and spend.

‍

Yields on Treasurys tumbled in part on rising expectations for coming cuts to rates, along with general fear about the health of the U.S. economy. The yield on the 10-year Treasury fell to 4.04% from 4.20% late Wednesday and from roughly 4.80% in January. That’s a huge move for the bond market.

‍

The U.S. economy at the moment is still growing, as the weekly jobless claims said that fewer workers applied for benefits at 219,000. A relatively solid job market has been the linchpin keeping the economy out of recession.

‍

A separate report said activity for U.S. transportation, finance and other businesses in the services industry grew last month. But the growth was weaker than expected, and businesses gave a mixed picture of how they see conditions.

‍

Worries about a potentially stagnating economy and high inflation knocked down all kinds of stocks, leading to drops for four out of every five that make up the S&P.

‍

BBY fell 18% because the electronics that it sells are made all over the world. UAL lost 15% because customers worried about the global economy may not fly as much for business or feel comfortable enough to take vacations. TGT tumbled 11% amid worries that its customers, already squeezed by still-high inflation, may be under even more stress.

‍

All told, the S&P 500 fell. 27 points to 5,396, which is around 11% below its all-time high set last month. The Dow sank 1,679 to 40,546 and the Nasdaq composite tumbled 1,050 to 16,551.

‍

In stock markets abroad, indexes fell sharply worldwide. France’s CAC 40 dropped 3.3%, and Germany’s DAX lost 3% in Europe.

‍

Japan’s Nikkei 225 sank 2.8%, Hong Kong’s Hang Seng lost 1.5% and South Korea’s Kospi dropped 0.8%.

‍

Earnings this week will have: yesterday – RH lower;

‍

Economic reports will see: yesterday – February trade balance rose to 122.7 billion, weekly jobless claims fell to 219K; today – March nonfarm payrolls report showed a better gain with 228,000 but the two previous months were lowered by 48,000. The unemployment rate rose to 4.2% while the average hourly earnings gained 0.3%. The workweek gained to 34.2 hours while the labor force participation rate came in at 62.5.