Market Alert 04.03.25
Today, the global financial markets are experiencing significant declines following President Donald Trump's announcement of sweeping new tariffs. Dubbed "Liberation Day," these measures include a universal 10% tariff on all imports, with additional "reciprocal tariffs" targeting specific countries such as China and the European Union.
The Market Reaction has been negative, but we expected volatility to increase this year, which presents us with investment opportunities.
U.S. Markets: The Dow Jones Industrial Average plunged 1,379.23 points (3.27%), the S&P 500 erased over approximately $2 trillion in value, and the Nasdaq Composite dropped a mind-numbing amount (5.31%). Notably, technology stocks like Apple, Nvidia, and Amazon faced significant declines due to their reliance on international supply chains.
European Markets: Major indices such as Germany's DAX, France's CAC 40, and Britain's FTSE 100 experienced steep losses, reflecting concerns over the 20% tariffs imposed on EU goods.
Asian Markets: Markets in China, Japan, and Southeast Asia tumbled as tariffs of up to 54% were levied on Chinese imports, with significant tariffs also targeting Japan and South Korea.
Investor Sentiment: The aggressive tariff strategy has sparked fears of a global trade war, leading to increased market volatility and concerns over potential economic slowdown and inflation. Investors are particularly worried about the impact on companies with extensive international operations and supply chains. Investor sentiment isn’t likely to drastically change in the short-term – the reduction to global growth estimates has yet to be approximated.
If you have a long-term investment horizon (>1year) this moment could represent a buying opportunity for long-term gains.
It’s always most difficult to invest when the outlook is opaque, but as old investing adage goes, “buy when there's blood in the streets", which means to purchase stocks or assets during extreme market turmoil or panic.
Outlook: Economists warn that these tariffs could reduce U.S. economic growth by two percentage points and push inflation near 5%, potentially triggering a global recession. The Federal Reserve may consider adjusting interest rates to mitigate the economic impact, but inflation concerns complicate such decisions.
Conclusion: In summary, the introduction of these tariffs has resulted in substantial market disruptions, with investors anticipating continued volatility amid escalating trade tensions. In the short term, this volatility can be quite unsettling and may provoke an emotional response.
However, it is precisely during such times that our role becomes crucial. You hired us to remain objective and make decisions based on a thorough analysis, stripping away the noise to identify the underlying signals. Some market observers see the recent drop in stocks as the start of something much worse on the horizon. We choose to see a long-term market opportunity for the benefit of our clients.