Multiple reliable news outlets reported over the weekend that Trump’s April 2nd tariff bender would be more “targeted” in nature than had been initially feared, with a number of companies and even entire sectors maybe getting some kind of temporary reprieve. This gave the tiniest bit of hope that maybe peak tariff chaos might have now passed. Dip buyers jumped all over this on Monday and went bargain-hunting. Stocks opened significantly higher and kept heading north all day to score solid gains for the session.
On Tuesday, confusing signals were sent out by different parties about progress in Ukraine negotiations and there was more fallout from the astonishing Signal classified information leak with White House officials scrambling to try (and mostly failing) to wordsmith their way out of any blame. More tariff barking from Trump and his minions, including about so-called “secondary tariffs” shattered the previous day’s fleeting dreams that maybe the infuriating bedlam might possibly be coming to an end.
The brief stock rally came to a grinding halt and the indexes swung between small gains and losses, mostly shrugging off some horrendous sentiment data showing plunging levels of confidence and optimism of a clearly very rattled American consumer, to finish the day barely changed.
Markets now seem resigned to not having any idea what April 2nd Tariff Day is going to look like until it arrives and came into Wednesday in a glum mood, with stocks falling hard at the opening bell. Trump then scheduled a fresh tariff announcement for right after the market close.
It certainly caught Wall Street’s attention and triggered another leg down in stock prices. The Magnificent Seven in particular had a frightful day (Nvidia and Tesla were each crushed by over 5% over the course of the session), severely dragging down the indexes of which they form such a large part.
When it came, the announcement was a 25% tariff on all finished cars and trucks coming in from outside the US as well as all imported car parts, effective April 2nd, including on vehicles that are assembled overseas by American car companies. No carve outs, no exemptions, no delays (at least, not yet).
Half of all vehicles sold in the US are imported and a third are from Asia. Price increases to American consumers in the thousands of dollars per vehicle are inevitable as a result of the policy. Auto prices are an important component of inflation calculations.
Asian and European stock markets nosedived in response, with the stocks of many automakers getting butchered. When US markets opened on Thursday morning, the sellers were all fired up and got to work. But the punishment was relatively selective, with mostly car companies and chip firms being taken behind the woodshed (Tesla, with a primarily US manufacturing base, was spared and actually moved higher). Things stabilized a bit late on, but the indexes all still had a losing day.
Asia and Europe dumped further on Friday and the US followed suit at the open after the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, showed a sticky rate of 2.6% with other sentiment readings showing alarmingly elevated inflation expectations in the medium/long term.
Anxiety about the fallout from April 2nd, now just days away, began to reach fever pitch (not helped by anecdotal stories of buyers swarming car dealerships all over the country to try and get ahead of tariffs) and the bears took complete control as the session went on, transforming the week from slightly green to firmly red. Once again, Big Tech/AI led the charge lower, with the NASDAQ having another shocker.
We have gone from a market priced for perfection only when the S&P 500 was above 6000 to a price level that is far more suitable to the current unsettled conditions. In other words, stock markets are now at a much more appropriate valuation than they were just a couple of months ago. That said, we will likely see more violent moves until some kind of economic clarity and/or political rationality emerges and we must acknowledge the possibility of a further decline.
I will publish my Q1 2025 Market Review next week. Keep an eye out for it in your inbox.
If you are not yet a client of Anglia Advisors and would like to explore becoming one, please feel free to reach out for a complimentary no-obligation discovery call with me.
ARTICLE OF THE WEEK ..
The case for owning global stocks, not just US. Do You Know The Muffin Man?
.. AND I QUOTE ..
“Used cars don’t face the same import tariffs. The spread between new and used vehicles could expand. There might be better deals to find on the used-car lot in 2025. Eventually, however, things adjust. We would expect the inflationary impact on new cars to trickle down to used cars by a similar amount.”
Rajat Gupta, JP Morgan auto analyst.
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing U.S. sector: Consumer Defensive (two biggest holdings: Costco, Procter & Gamble) ⬆︎ 1.3% for the week
Last week’s worst performing U.S. sector: Technology (two biggest holdings: Apple, Microsoft) for the second week in a row ⬇︎ 3.8% for the week
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest U.S. companies. Its price fell 1.8% last week, is down 5.2% so far this year and ended the week 9.3% below its all-time record closing high (02/19/2025).
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest U.S. stocks. Its price fell 2.1% last week, is down 9.3% so far this year and ended the week 17.4% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS * ⬌ 4.33% (unchanged)
PRIME RATE ** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬌ 4.33% (4.33% a week ago)
2 YEAR TREASURY ⬇︎ 3.89% (3.94% a week ago)
5 YEAR TREASURY ⬇︎ 3.98% (4.00% a week ago)
10 YEAR TREASURY *** ⬆︎ 4.27% (4.25% a week ago)
20 YEAR TREASURY ⬆︎ 4.65% (4.60% a week ago)
30 YEAR TREASURY ⬆︎ 4.64% (4.59% a week ago)
Treasury data courtesy of ustreasuryyieldcurve.com as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for interbank loans and for determining high yield savings rates.
** Used as a basis for determining many consumer loan rates such as credit cards, home equity and auto.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬇︎ 6.65%
One week ago: 6.67%, one month ago: 6.76%, one year ago: 6.79%
Data courtesy of: FRED Economic Data, St. Louis Fed as of last Thursday.
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on May 7th?
Unchanged from now .. ⬇︎ 84% probability (86% a week ago)
0.25% lower than now .. ⬆︎ 16% probability (14% a week ago)
What is the most commonly-expected number of remaining 0.25% Fed interest rate cuts in 2025?
⬌ 3 (unchanged from a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
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