CEO Message
I celebrated the end of tax season by playing 18 holes of golf this morning. It was cold and windy but I was very happy to trudge around the course instead of sitting in front of my computer. (And when you play like I do, there’s a lot of trudging.)
Now let’s turn our attention to what’s been happening in the market the past few weeks.
Quick Recap of Tariff-mania
Earlier this month, President Trump introduced a sweeping new set of tariffs, including a blanket 10% levy on all imports, with even steeper, targeted rates aimed at specific countries—China being hit the hardest. The initial market reaction was swift and negative, as fears of a prolonged trade war sent shock-waves through industries reliant on global supply chains, particularly tech and manufacturing. China quickly retaliated with tariffs of their own, escalating tensions further. This move added a fresh layer of uncertainty, especially given how deeply integrated and delicate the global tech supply chain has become.
And then on April 9, markets roared back after the administration unexpectedly paused most new tariffs (except on China) for 90 days. That breather sent stocks soaring: the Dow jumped over 2,900 points, the NASDAQ rallied 12%, and the S&P 500 gained nearly 10%. Tech led the rebound, as investors took it as a sign that tensions might cool — or at least not get worse. It didn’t solve everything, but it gave Wall Street a much-needed shot of optimism.
After the euphoria subsided, the idea of a long trade war (mostly with China) began to settle in. While markets have stabilized (ie, no more 2k point swings) they’ve generally been declining.
Policy vs Communication
As I kept repeating in the run up to the election last year, markets crave certainty. Even leaving aside the substance of any particular policy, the stock market wants to be able to price things well into the future. That becomes very hard to do when important economic inputs are changing weekly, daily or even hourly.
The uncertainty was exacerbated by a lack of cohesive message on what the tariffs were meant to accomplish. Trump and/or his advisors at various points claimed they would raise a lot of revenue and that they would cause companies to move production back to the US (those two things are mutually exclusive). They were touted as both permanent and resolute but also intended to be the opening to negotiations (those two things are also mutually exclusive). They were meant to isolate China, but also included everyone else. They were allegedly reciprocal but also applied to countries with 0% tariffs on us.
When you have so many contradictions and unknown questions, you get a stock market that reacts to every crumb of news hoping that it holds the key to what happens next.
So what does happen next?
I’m skeptical that there was a well thought out plan that gamed out every scenario, and the market’s reaction spooked the White House enough that they announced a pause. That tells me they’re still watching the markets and wouldn’t mind an off-ramp to put most of this behind them. The most likely scenario is that they announce trade deals with almost everyone (or, at least intentions to pursue trade deals, as these things take months rather than a few days). That ‘almost’ would seemingly not include the second-biggest economy in the world, so that lingering issue will drag down companies that manufacture in China for a while.
Some Silver Linings
Not all doom and gloom. The April CPI report showed prices slowing for the second month in a row, with essentials like groceries, gas — and yes, even eggs — finally easing. The jobs report showed a better than expected +228k new openings. And my favorite hobby horse, The Tax Bill continued its long and arduous march by passing another procedural step in the House (we still don’t have any actual words or content of the bill, but those are minor details.)