US stock index futures plunged overnight. The S&P 500 briefly dipped below 4,800, hitting levels last seen in January 2024. The tech-heavy NASDAQ also fell to lows last seen 15 months ago.
Source: TN Trader
The sell-off was a continuation of the decline which began after the close last Wednesday. This was when President Trump unveiled the tariffs to be applied on US imports from trading partners around the world.
Investors have been in panic-mode ever since. Recession fears have increased, while expectations of sharp rate cuts from the Federal Reserve and other central banks have soared. The market now anticipates a 25 basis point rate cut from the Fed at its next meeting in a month’s time.
Looking further ahead, the CME’s FedWatch Tool indicates the Fed Funds rate falling to 3.00-3.25% by the end of this year. That would suggest rate cuts totalling 125 basis points from current levels. Markets had been paralysed by uncertainty in the lead-up to President Trump’s tariff announcement last week.
The S&P 500 and NASDAQ had already pulled back from their respective record highs hit in mid-February, and traders were already looking to ‘buy the dip’. But anyone expecting clarity after Wednesday’s announcement was left disappointed.
The tariffs were far more aggressive than anticipated, and it’s become painfully apparent that Trump is completely indifferent to a collapsing stock market. For him, this is a long term project aimed at rebuilding the US’s industrial base. And no matter how much tech titans and other billionaires may bellyache, Mr Trump has got his eyes focused on his base, which includes the 80% of the population who don’t own equities, and who baulk at the concentrated wealth of the top 10%.
This is the president’s first move in resetting the US economy. It is undoubtedly an extremely high-risk strategy. But to give it the slightest chance of working, the Trump administration will want to demonstrate their unblinking resolve.
As far as they are concerned, if countries want tariff relief, then they better get in touch and book a negotiation slot. The phone lines are now open.
Meanwhile, China has said that it will impose a 34% tariff on all US imports from 10th April, while considering other retaliatory measures. Markets will be on tenterhooks ahead of the European Union’s response. There could be a sharp recovery across risk assets. But there’s also the danger that margin calls on leveraged trades trigger another wave of selling. For now, expect volatility to remain elevated.
