Week ended April 4, 2025: stocks hammered following Trump tariff announcement
- tim@emorningcoffee.com
- 10 hours ago
- 5 min read
“Economists also attacked Trump’s obsession with reducing bilateral trade deficits to zero as economically illiterate, since there will always be items that it is impossible or economically unviable for countries to grow or make themselves — for example, the US cannot grow its own bananas on any meaningful scale.”
MY TRADES RECENTLY
To break protocol and in light of market turmoil, I thought I would start with what I am doing in my portfolio. I closed 1Q2025 with the highest position of cash and bonds in many quarters, and have also been rolling a series of SPY puts that are offering some (albeit not nearly enough) downside protection. As a result, I have capital to deploy selectively and in small size as stock prices weaken. I added scraps (meaning 25-100 shares depending on name) on Thursday and Friday of V, NVDA, CSCO, GOOG, LLY and BRKB (latter replacing shares on which I have written covered calls). This might prove to be too early, but I am a long-term investor and have conviction around these names. If we get a bounce in the coming days, I will look at writing more covered calls on existing positions to generate income, but now is not the time with prices gapping down. (As an aside, I am working on my portfolio update for end of 1Q2025, and hope to get this out mid-next week.)
If you are looking at your investment portfolio and are shocked at the devaluation this week, please keep in mind that no one can time markets. If you are a long-term investor, the best strategy is to stay invested, and to periodically adjust your portfolio mix and “adjust around the edges” to lessen effects of harsh downturns, as we are experiencing now. Unless you are selling, the losses you are seeing now are unrealised and matter little in the long term. You should keep six months to one year of liquidity needs in cash / cash equivalents (UST bills / short-dated bonds) so you don’t have to sell stocks at depressed prices, and another year or two beyond that in relatively conservative investments e.g. intermediate maturity bonds (including targeted maturity bond ETFs) or low-beta stocks. If you don’t need the money, stay invested and average down but in small size. THIS IS NOT INVESTMENT ADVICE.
WHAT MATTERED LAST WEEK
I’m not going to say much in the weekly about what happened last week because the harsh and deep decline in risk sentiment driving stock prices down sharply has been splashed all over the news, and the culprit is clear as you can see in the cartoon at the beginning of this update. It has been self-inflicted, and did not need to occur.
I could go on and on about the very poor decisions of the “economically-illiterate” (FT’s words above) Trump administration, but markets are speaking to this loudly enough. How, when and what the catalyst will be to trigger stabilisation and then (hopefully) a bounce remains to be seen. The Trump tariff plan is just short of a joke were it not so damn painful to watch. Targeted reciprocal tariffs in some cases to level the playing field isn’t entirely stupid, but the methodology being used by Mr Trump and his economic team is like watching a tragedy unfold in slow motion. I will stop there at the risk of offending many of my readers who might support this administration. I am a much more active ranter on X, so if you are happy with the way things are heading, I suggest that you NOT follow me on X.
Lost in the meltdown last week were two bits of economic information I consider important as to what might happen going forward.
Firstly, the March jobs report was released on Friday, which you can find here. Although unemployment ticked up slightly (from 4.1% to 4.2%), nearly double the number of expected jobs were added in March. Wages also increased 0.3% MoM (3.8% YoY), in line with expectations but still suggesting there is wage pressure contributing to higher-than-target inflation. I view the strong labour market report as a legacy of the last administration, during which unemployment reached record lows. The resiliency of the U.S. jobs market provides no ammunition for the Fed to reduce rates, because at least one of its twin mandates – a solid jobs market – continues. Having said that, I believe the U.S. economy is starting to suffer, as consumers pull in their horns and businesses delay investment decisions. This will not show up in the jobs numbers for another month or two. Also keep in mind the cautious outlook of many companies in the last round of earnings, which I imagine will be repeated in the next round of earnings that begin shortly.
Secondly, Fed Chairman Powell spoke on Friday morning to the Society for Advancing Business Editing and Writing’s annual conference in Arlington, VA. You can find the 50 minute speech and Q&A here. His speech followed the release the same morning of the jobs report, and Mr Powell was clear that the resilient jobs market and ongoing inflationary threats mean that the Fed will not be keen to reduce interest rates soon. For investors and in spite of Mr Trump’s pressure, the Fed’s dual mandate is clear. It is not the Fed’s job to bail out poor fiscal policy decisions by the current administration (unless they drive the US into recession, which increasingly looks possible), or to have the back of stock investors. Mr Powell steered clear, as he should, of the policies of the administration other than to note that tariffs are likely to put upward pressure on prices. As far as rates expectations, the CME FedWatch Tool has now increased the expected number of 25bps reductions in the Fed Funds rate in 2025 to four.
MARKETS THIS WEEK
You certainly by now know how poor the week was for stock investors, with equities globally getting crushed following Mr Trump’s announcement of blanket tariffs. No assets were really immune, with credit also worsening further as spreads gap out, suggesting bond investors are increasing their bets of a recession. The tables at the end of this update include weekly and YtD performance for many of the indices and asset classes I track.
WHAT’S AHEAD
Economic data that matters this coming week includes US CPI and PPI for March, and an update on US consumer sentiment. The minutes will also be released from the last FOMC meeting. China releases its CPI for March, and the Eurozone will release February retail sales.
Earnings for S&P 500 companies also begin next week, starting with Delta on Wednesday – which should provide a harbinger of consumer spending for travel – and the banks on Friday, including JP Morgan, Wells Fargo and Morgan Stanley.
Upcoming central bank policy meetings are as follows:
· ECB: April 16-17
· Bank of Japan: April 30-May 1
· FOMC: May 6-7
· Bank of England: May 8
MARKET TABLES




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