President Donald Trump’s trade war is causing alarm in financial markets, with stocks, bonds, and the US dollar all experiencing significant declines. The Dow Jones Industrial Average has tumbled 9.1% in the first three weeks of April, its worst performance for any April since 1932. The S&P 500 has plunged 14% over Trump’s first term, the worst performance through April 21 for any president since records began in 1928.
The US dollar has also fallen 5.5% during Trump’s new term, the worst start since data collection began in 1974. Investors are pulling money out of American stocks and bonds and pouring it into investments around the rest of the world. The MSCI All World index, excluding the United States, has risen 2.9% over the course of Trump’s new term.
Fearful of a global recession, traders have sold off oil dramatically, giving US crude its worst start to any presidential administration since former President Bill Clinton’s second term. Meanwhile, gold has skyrocketed nearly 25% during Trump’s new term, crushing the previous record of 13.5% during former President Jimmy Carter’s start to his term in 1977. Goldman Sachs CEO David Solomon noted that the confusion around Trump’s ever-changing policy has hurt businesses‘ ability to make necessary adjustments.
“The level of uncertainty is too high. It’s not productive,” he said.
Trump’s tariffs unsettle global finance
“It will have an effect on the growth of the economy, and we will see that, in my opinion, relatively quickly.”
The uncertainty and rapid reordering of global trade dynamics are causing tremendous confusion and unease among consumers, businesses, and traders. While economists don’t yet expect anything close to the so-called stagflation of the 1970s, the economic outlook remains highly uncertain. Many investors are still wary that their favorite individual stocks might suffer damage from a potential trade war.
The White House has indicated that discussions with several countries, including Japan, are ongoing, but the details and timelines remain uncertain. Uncertainty around how long negotiations will take is one concern for the market. Another is the specific details of the deals and sector-specific tariffs still in the pipeline, which could affect individual companies, including some of the biggest names in the market.
Last week, Nvidia announced it was taking a $5.5 billion charge related to export restrictions on its H20 processors, causing its stock to drop sharply. Nvidia’s decline illustrates the potential risk to individual stocks from the tariff discussions. The tariff negotiations could also impact the market through earnings season, as corporate executives attempt to provide investors and analysts with a clearer picture of how the global trade situation will affect their companies.
Commentary from executives could highlight potential exposures not yet fully considered by Wall Street. With the continuing decline in the price of US Treasuries, there is debate about the future of America’s status as a truly exceptional safe haven. The damage President Donald Trump has already done to financial markets and the global economy is causing concern, and it remains to be seen how long the effects will last.
