A return to reality after a historic day: The economic damages are casting long shadows.. This is what Wall Street has faced recently, with US stocks resuming their decline after marking their best daily performance in decades yesterday.
Even as President Donald Trump paused most reciprocal tariffs, the chaos and existing tariffs still pose threats to the economy.
US stock indices collapsed once more on Thursday, after Trump explained the actual tariff on Chinese products is now up to 145%, and not 125% as he stated before.
Dow Jones jumped 3000 points on Wednesday, before collapsing by over 1500 points today, at 4.5%, while S&P 500 lost 3.7%, as NASDAQ shed 5.2%.
Traders were jubilant yesterday after the US pause on tariffs on dozens of countries, with further positive sentiment in the morning as the EU also paused its retaliatory tariffs on US products.
US Treasury Secretary Scott Bessent said that over 70 countries have contacted the US to negotiate new trade terms, in a sign that was considered highly positive by the administration.
The Harsh Reality Remains
Economists believe the economic fallout has already occurred, with high recession risks for the US and the world, with the stocks still far from their levels before Trump’s reciprocal tariff announcement.
The base US 10% tariff on most countries are still in place, as well as the 25% tariff on car imports, steel, and aluminum, with Trump vowing more tariffs on pharmaceuticals, wood, semiconductors, and copper.
The dollar index tumbled 1.8% against a basket of major rivals today, hitting early October lows, in a sign of huge investor concern about the health of the US economy.
Earlier US data today showed inflation slowed down markedly today, which could be a sign of slower demand.
China Won’t Back Down
Trump has remained committed to his aggressive trade war with China, raising the total tariffs to 145%.
China has said it’s still open to negotiation with the US, but asserted it won’t back down if Trump chose an escalation to the trade war.
Imminent Collapse or Buying Opportunity?
We, like you, don’t know what’s waiting for the stock market in the future, but the first quarter of 2025 has given investors plenty of reasons to be concerned.
It has become unusually difficult to predict the direction of the markets due to the chaotic nature of the US tariff war, but the overall sentiment remains decidedly negative.
It’s always viable and recommended to hire a financial consultant to analyze the situation for you, but we’ll present some major data and views that could help you with future decisions.
There are obviously no optimal answers, with the future filled to the brim with the unknowns.
We’re not sure how the market will react, or when, or how you will react, or how your needs will develop as you age.
In the past, major US stock indices always recovered from such losses, but such recovery could take a long time, and isn’t guaranteed at all.
If you can’t handle pain in the short and medium terms, you won’t achieve profits in the long term, and no consultant could help you with that.
Only you could decide the level of uncomfort you’re willing to live with, and the level of risk you’re willing to shoulder.
Here are three quick tips that could help:
If you’re 40 years or younger and are collecting assets, consider a 100% stock wallet, with a market decline giving you opportunity to bargain hunt.
If you’re near retirement or already retired, consider making 40-60% of your funds stock-based, it could protect you from big hits.
If you’re highly concerned or jittery, you could only put 30% of your funds in stocks, but it’ll require expanded savings on your part before retirement.
What about Market Manipulation?
There are accusations floating around of insider trading, market manipulation and corruption on a wide scale that could reach the White House.
Fingers are particularly pointing to the timing of Trump’s announcements on social media and subsequent spikes in stock prices.
Trump stated: “it’s a perfect time to buy” just hours before he walked back his tariffs and caused a massive rally in the stock market.
Democratic senators are already calling for an investigation into potential insider trading accompanying these announcements.
Analysts’ Expectations
Goldman Sachs analysts reduced their odds of a US recession this year to nearly 50% as Trump calmed down his trade war.
However, JPMorgan analysts still expect a 60% chance of a recession in the US and worldwide.
