On and Off Tariff Reports Send Traders on Wild Ride: April 7, 2025

Fears of global recession sent equities plunging this morning to their lowest levels in over a year. But stock bulls thought they caught a break following headlines stating that the administration’s economic advisor Kevin Hassett revealed that President Trump is considering a 90-day tariff pause on all countries ex-China. Indices soared north in comeback fashion, but the White House quickly responded, claiming that the halt was fake news, throwing cold water on the attempted recovery. Meanwhile, investors are navigating a challenging landscape in which they are left waiting for a reversal in policy from the Oval Office, since this full-on trade war will likely produce a downturn and a bear market if it isn’t pared back soon.

Bears Attack Equities, Treasurys and Commodities

Trading has been wild today with stocks ranging from sizeable losses to robust gains multiple times. Commodities and Treasurys are declining too, the former due to recession fears weighing on demand, while the latter drops due to a pickup in inflation expectations. The yield curve is moving in bear-flattening fashion, led north by the long-end, which is helping the greenback advance on widening rate differentials. All major, domestic equity benchmarks are down sharply at the moment, with the Dow Jones Industrial, Russell 2000, S&P 500 and Nasdaq 100 losing 1.9%, 1.7%, 1.3% and 0.6%. All sectors are getting sold, but real estate, materials, and consumer discretionary are hurting the most; they’re trimming 2.4%, 1.9% and 1.7%. The 2- and 10-year Treasury maturities are changing hands at 3.72% and 4.13%, 8 and 12 basis points (bps) heavier across both instruments. The Dollar Index is benefiting from rising borrowing costs stateside; it’s up 55 bps as the US currency appreciates relative to the euro, franc, pound sterling, yen, loonie and Aussie tender but is depreciating against the yuan. Commodities are travelling south overall with copper, crude oil, lumber, gold and silver lower by 3.1%, 2.1%, 1.9%, 1.8% and 0.3%. WTI crude oil traded at its lowest price in over four years of $58.97 per barrel.

Markets Need Trade Softening, Fed Cuts, Policy Offsets

The highest US tariff rates in over a century are generating historic market volatility globally. Not only does the shifting trade policy threaten to spark a global recession, it also materially changes the way many companies do business. But the severe equity selloff is not just because of levies, it’s also due to government expenditure reductions, especially when considering that we came into this year with historically lofty valuations and robust earnings expectations driven in part by significant fiscal stimulus. The elevated uncertainty alongside shocks of the trade war and austerity measures is draining consumer spending momentum, animal spirits and profit multiples while higher costs from tariffs compress corporate margins and push household sentiment south. Bottom lines clearly can’ t expand in this environment, but the landscape may shift if the White House reconsiders its stances, the Fed comes out to the rescue with five or more cuts this year, or a taxation package from Capitol Hill provides an offset.

International Roundup

Europe Cash Register Volumes Miss Expectations

Retail sales volumes in the euro area climbed 0.3% month over month (m/m) in February, missing the analyst consensus expectation for a 0.5% increase but up from the flat result in the first month of the year. Relative to February of 2024, sales gained 2.3%, surpassing the 1.8% estimate and accelerated from the positive 1.8% result in January. Growth relative to this past January was led by 0.3% expansions for both the food, drinks, tobacco group and the category consisting of non-food products (except automotive fuel). Automotive fuel transactions at specialized stores, furthermore, advanced 0.2%.

UK Home Prices Ease After Tax Holiday

UK home prices dropped 0.5% m/m last month after falling 0.2% in February, according to the Halifax House Price Index. Analysts anticipated the metric to climb 0.2%. On a year-over-year basis, sales prices were up 2.8%, matching the February rate of increase. Halifax, the UK’s largest mortgage provider, attributes the m/m decline to sales volumes returning to more normal levels after a holiday on real estate transfer taxes ended.