Detonation Donald
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Dodging trade-war missiles and economic shrapnel of every shape, size, and stupidity, investors dove into the fallout shelter for a second straight day.
Level Change 4/4/25 (%)
– – – – – – – – – – – – – – –
-5.5 Dow
-5.8 Nasdaq
-6.1 Nasdaq 100
-6.0 S&P 500
-4.8 S&P 400
-4.2 S&P 600
The Nasdaq entered official bear-market territory, dragged down by Tesla (TSLA -10.4%) doing its best impression of a luxury lead balloon, with the S&P nipping at its heels. Since February 19, the indexes have surrendered 22% and 17%, respectively.
China announced a tit-for-tat retaliation against America’s 34% tariffs, with a matching 34% levy on all US imports starting April 10. Beijing’s tariff commission called America’s approach “a typical unilateral bullying practice.” President Trump fired back on Truth Social that China “PLAYED IT WRONG” and “PANICKED” — the way a tennis player “panics” by returning serve.
The International Monetary Fund joined China’s “panic,” with its director stating what Econ 101 students typed into early-February essays: this trade war poses “significant risk to the global outlook at a time of sluggish growth.”
Not far behind was Federal Reserve Chair Jerome Powell, whose data dependency turned into data drenchment at the first wail of the trade war siren. He told a gathering of business writers (your correspondent tragically omitted) in Arlington, Virginia that “tariff increases will be significantly larger than expected,” and not in a good way. Economic effects will likely “include higher inflation and slower growth.”
But stagflation is what I campaigned on… Trump may have mused from the 19th hole of his Mar-a-Lago tropical tax haven, before settling on a better angle: it’s all Powell’s fault.
Trumpian thumbs took to Truth Social, accusing the Fed chair of being “always late” to clean up other people’s messes, then admonished him to “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
While Powell appears in no hurry to cut rates, bond traders aren’t waiting around. Enough data, time to crush yields. A flight to safety pushed the 10-year Treasury below 4% for the first time since the November election, and mortgage rates headed south too — good for homebuyers and builders like D.R. Horton (DHI +4.6%) and PulteGroup (PHM +3.6%), who’ve been waiting for the Fed to blink.
It wasn’t the only good news.
March unemployment came in stronger than expected, up 228,000 versus the consensus 130,000. Granted, January and February were revised down by a combined 48,000, and some analysts dismissed March strength as a mere rebound from weather-dampened prior months. They gestured over their shoulders at the smoldering remains of global trade, then raised eyebrows in unison to convey just you wait.
— Jason Kelly
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