Tariffs have caused some investors to question the role of the United States in the heart of the financial system and the security of the country’s assets during market agitation periods.
One hundred days of President Donald Trump. Seventy days of fluctuations in financial markets. Thirty -two days of losses. More than US $ 6.5 billion lost of the value of companies that are quoted in the stock market.
For financial markets, the 7 percent fall of the S&P 500 is the worst beginning of a presidential mandate since Gerald Ford replaced Richard Nixon in August 1974 after the Watergate scandal. The collapse is more critical than when the technological bubble broke out at the beginning of the century, and George W. Bush inherited a market already in free fall.
Instead, Trump inherited an economy with a solid base and a stock market that rose from a historical maximum to another.
Promises
A month after the start of Trump’s mandate, the S&P 500 index marked a historical maximum. Investors were animated by the apparently unlimited potential of artificial intelligence and by a new president who had campaigned with a growth favorable to growth.
In a speech pronounced on February 19 before the Institute of the Futura Investment Initiative, in Miami, Trump assured investors that they were waiting for economic prosperity.
However, one day after Trump’s speech, concern for inflation began to affect the market, intensifying in early March with the announcement of 25% tariffs to Mexico and Canada.
Paradigm change
The announcement of two -digit tariffs to countries around the world caused the worst sale of two days of the S&P 500 since March 2020. The difference was that the fall occurred in direct response to government policy.
“It was a quick sale, especially if one takes into account that there was no external shock such as pandemic,” said Mohamed El-Erian, president of Queens’ College at the University of Cambridge and former executive director of Pimco, one of the world’s greatest asset managers.
Economists began to warn that the economy, which had been experiencing a constant slowdown in employment growth as inflation cooled, headed towards a much more acute recession. The Government returned to the fall of the actions. Investors rushed to protect their wallets from new losses.
The week prior to the entry into force of tariffs, both the Nasdaq Composite index, of great technological weight, and the 2000 Russell Index of smaller companies – which are usually more a barometer of the economic perspectives than the much larger multinational companies – had fallen into bearish markets.
Alarm
Normally, in times of agitation, investors around the world seek American assets as a source of reliability and security. They buy dollars and American public debt, which usually causes the value of each of them to rise.
That is what happened when the stock market initially fell. But in the days before the tariffs, both the dollar and the US public debt also began to fall, making the alarms jump on Wall Street.
The operators described a sensation of panic and fear when prices staggered down, shooting the yields.
The 30 -year Treasury Bonus began with a yield slightly greater than 4.3 percent. During the night, before the tariffs, the performance – which is indicative of the cost of loans for the US government – went into force. It was a huge movement in a market that normally moves in hundredths of percentage point every day.
I-I tariffs
Since April 9, there has been a change in the tone of the government.
Officials have promoted what they say have been positive trade negotiations that take place between racks.
Although government claims about negotiations are rejected for being invented, as in the case of China, investors have interpreted that the White House is trying to give the market reasons to rejoice.
However, few are willing to bet on what happens next.
“If the Government soon moderates tariff policy and tariff uncertainty decreases, lasting damage could be modest or insignificant,” said James Eelhof, BNP economist from BNP Paribas. He said he dedicated more and more time to answer his clients’ questions about how a possible economic recession could be, if tariff uncertainty persists.
“If tariffs continue to behave like a self, going up, going down and rising again, this uncertainty will not decrease and will have a paralyzing effect especially on companies,” he said.