Why are US tariffs hitting stocks so hard?
Investor anxiety over impending US tariffs has intensified, pushing the S&P 500 down 5.1% this year—its worst first-quarter performance since 2022. Since late February, US equities have lost around $5 trillion in market value. Companies like Nvidia Corp., Palantir Technologies Inc., and Tesla Inc. saw premarket declines exceeding 3%. Goldman Sachs strategist David Kostin has already lowered his year-end target for the S&P 500 to 5,700, down from 6,200, citing growing recession risks tied to tariff uncertainty.
Key market movements
- S&P 500 futures fell 0.6% (as of 6:12 a.m. New York time)
- Nasdaq 100 futures dropped 0.9%
- Dow Jones Industrial Average futures slipped 0.3%
- Stoxx Europe 600 declined 1.7%
- MSCI World Index fell 0.5%
- Bitcoin dropped 1.4% to $81,345.70
- West Texas Intermediate crude rose 0.6% to $69.43 per barrel
Which global markets are suffering the most?
The sell-off isn’t confined to Wall Street. Europe’s Stoxx 600 index fell 1.2%, while Japan’s Nikkei 225 plunged 4%. Taiwan’s stock index slipped into correction territory. The MSCI World Index dropped 0.5%, signaling broad-based losses. Investors worldwide are repositioning portfolios as concerns about prolonged tariff negotiations mount.
How are currencies and commodities reacting to the turmoil?
The Bloomberg Dollar Spot Index remained mostly unchanged, but major currencies saw movement. The euro and British pound each lost 0.2%, trading at $1.0807 and $1.2919, respectively. Meanwhile, gold prices jumped 0.9% to $3,114.42 an ounce as investors sought safer investments amid market uncertainty.
Could tariffs trigger a US recession?
According to Bloomberg Economics, the US economy could take a 4% hit to GDP over the next two to three years, with inflation rising by 2.5%. With President Trump’s reciprocal tariff plan set to take effect on April 2, concerns about a prolonged trade dispute are growing. The president also hinted at possible restrictions on Russian oil exports, further fueling market volatility.
Will the Federal Reserve cut interest rates to offset risks?
Speculation is mounting that trade tensions could prompt the Federal Reserve and European Central Bank to consider interest rate cuts. US 10-year Treasury yields fell six basis points to 4.19%, while Germany’s 10-year yield dropped to 2.68%. UK bond yields declined four basis points to 4.65%, signaling a flight to safer assets.
What should investors do now?
Markets remain highly volatile, with risks of further declines if tariff negotiations drag on. With the Federal Reserve potentially shifting policy in response to market conditions, investors should stay alert to any policy changes. Safe-haven assets like gold and Treasuries are gaining traction, and portfolio diversification may be crucial in navigating the uncertainty ahead.
FAQs:
Why are US tariffs affecting global stocks?
US tariffs create uncertainty, impacting corporate earnings and economic growth, leading to market declines.
Will the Federal Reserve cut interest rates due to tariff concerns?
Speculation is growing that trade uncertainty could push the Fed toward rate cuts to support the economy.
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