- The S&P 500 closed Monday in the red, continuing its downtrend from last week.
- Trump has threatened to impose more tariffs on China if it implements counter-tariffs.
- The nonfarm payrolls report revealed an unexpected surge in US job growth in March.
Equities declined on Monday, extending last week’s collapse amid economic uncertainty. Trump’s aggressive tariff campaign has dampened risk appetite, sending most investors to safe-haven assets. Meanwhile, recession fears are piling pressure on the Fed to consider more rate cuts this year.
S&P 500 Index (Source: Bloomberg)
The S&P 500 closed Monday in the red, continuing its downtrend from last week. There was turmoil in the equities market last week after Trump announced new reciprocal tariffs. The new levies affect most of the US’s trading partners, increasing worries about a global trade war. Some major economies like China and the Eurozone have promised counter-tariffs. Meanwhile, smaller economies are ready to negotiate better trading deals.
The biggest loser with the new tariffs is China. Moreover, Trump has threatened to impose more tariffs if the country implements counter-tariffs. During his previous term, Trump ignited a trade war between China and the US that weighed heavily on the stock market. Another such period in the markets has started.
It is clear that Trump is pushing aggressively to achieve his goals, even if the economy will suffer. As a result, analysts have increased the likelihood of a recession. At the same time, panic has sent most investors to safer assets, leading to a decline in shares of big companies like Tesla and Apple.
Meanwhile, market participants are also paying attention to economic data. Notably, the nonfarm payrolls report revealed an unexpected surge in US job growth in March. However, the unemployment rate jumped from 4.1% to 4.2%. The report showed growing cracks in the labor market.
The ongoing tariff campaign is bound to hurt employment. As the cost of imports increases, most companies will lay off workers to try and survive. The labor sector drives a huge part of the economy. Therefore, weak demand will increase the risk of a recession. Moreover, it will force the Fed to step in and cut interest rates.
On Friday, Powell maintained that the Fed needs more time to assess the impact of Trump’s tariffs. Nevertheless, rate cut expectations have been on the rise. Traders are now pricing at least four moves this year. The upcoming consumer inflation report will keep shaping this outlook.
