Following last week's significant tariff announcements and subsequent market turbulence, we've experienced yet another week of heightened volatility. Policy uncertainty continues to drive sharp swings in markets, and we want to provide clarity on recent developments and our approach moving forward.
What happened this week?
The most notable news occurred on Wednesday when President Trump announced a temporary 90-day suspension of certain tariffs. Simultaneously, the trade conflict with China escalated further, with tariffs on Chinese imports surging dramatically to 145%. China responded in kind, raising tariffs on U.S. goods to 125%. This intensified trade battle has heightened concerns around inflationary pressures and the potential for recession.
How are markets responding?
After experiencing continued declines early in the week, markets reacted positively to news of the 90-day reciprocal tariff suspension. This policy shift sparked a 9.5% rally on Wednesday, marking the S&P 500's third-largest single-day gain since World War II. However, this optimism quickly faded, with the S&P 500 surrendering 3.4% of those gains the following day. Despite this volatility, the S&P 500 remains on pace for a solidly positive week, up almost 6% at the time of writing.
The bond market also experienced increased volatility. The yield on the 10-year U.S. Treasury rose sharply, approaching 4.6% at its highest point. Investor concerns over potential inflation, uncertainty around trade policies, possible foreign selling pressures, and underlying liquidity issues among hedge funds contributed to this increase.
Currency markets reacted notably as well, with the U.S. dollar weakening, boosting returns from international markets for U.S. investors.
What are we doing now?
We continue to closely monitor policy developments and market responses. Diplomatic efforts aimed at resolving trade tensions are reportedly underway, but we remain prepared for either further escalation or meaningful policy breakthroughs.
Rallies like the one experienced on Wednesday highlight the difficulty and risk involved in attempting to time the market. History tells us that a quality focused investment discipline and insistence on diversification are keys to lasting success over time. Staying on course is key, as missing even a few of the best days in the market can have a big impact on long-term success.
As always, we remain committed to helping you navigate these uncertain times. Please reach out with any questions or concerns.