Market Volatility
Coming into 2025, I predicted that we would see heightened stock market volatility as we prepared for Trump’s second term in the White House. I think I may have gotten that prediction right. Similar to his first term, Trump prefers to negotiate with tariff threats in public, and the markets can quickly react. However, this time it’s a bit different. During Trump’s first term, the high majority of those trade negotiations were focused on China. So far into his second term, Trump has decided to negotiate with all the US’s major trading partners at the same time. It reminds me of the title of 2023’s Best Picture Academy Award Winner – “Everything Everywhere All at Once”.
The stock market does not react positively to uncertainty, and that has been the case as the S&P 500 was on the verge of a bear market (a drop of 20% or more from a recent high) entering April 9. Investors feared Trump’s large tariffs on the US’s major trading partners may reignite inflation and cause an economic downturn. The momentum dramatically shifted later that day when Trump declared a 90-day pause on the reciprocal tariffs from April 2, leaving a 10% blanket tariff on trade partners in the interim. The exception was China whose good tariffs have been raised to 125%. The S&P 500 blasted off with a sigh of relief closing 9.5% higher.
