Written by Millan Chauhan
We saw the Trump administration issue several tariff announcements last week which included both the US and China implementing retaliatory tariffs, escalating the trade war between the world’s two largest economies.
President Trump implemented 145% tariffs on Chinese imports, which China responded to with 125% tariffs on all US imports. Universal tariffs of 10% were also announced for imports into the US, however, Trump later announced a 90-day pause on tariffs (except for China) which offers the opportunity for nations to negotiate better terms.
These constantly evolving headlines caused higher levels of volatility as the S&P 500 experienced the three largest intra-day price movements on record, all in the same week.
On Tuesday, the S&P 500 almost entered a bear market, which is defined as a decline in prices of more than 20% from their high. We also saw the third-highest daily return for both the S&P 500 and the technology-heavy index of the Nasdaq. In what was a remarkable week, the S&P 500 closed +4.8% higher and the Nasdaq +6.5% higher, both in GBP terms.
This included the largest daily return for the S&P 500 in history as the index climbed +9.5% last Wednesday. It is a reminder that even under the most stressed market conditions, the resilient investor can be rewarded and emphasises the importance of staying invested.
Last Friday evening, the Trump administration announced that there would be exemptions from tariffs for Chinese-imported phones, computers and other electronics. However, it later emerged that these exemptions would be temporary and could face a separate round of tariffs, contributing to the growing uncertainty.
Amid all the tariff discussions, the US Consumer Price Index (CPI) fell to its lowest level in four years, 2.4% in March from 2.8% in February; this figure came in below expectations. We also saw the big US banks open the quarterly earnings season, posting strong earnings but executives warned of tariff implications for economic growth. JP Morgan’s earnings exceeded estimates, but their CEO, Jamie Dimon warned of credit risks amid the current market volatility.
According to FactSet, the Q1 2025 earnings growth rate for the S&P 500 is expected to be 7.3% but this figure is subject to further revisions as companies issue guidance on their expected earnings for future quarters.
Tariff risks have reduced economic growth forecasts and increased the likelihood of the US entering a recession. This has resulted in further weakness in the US Dollar, which fell -1.5% last week against Sterling and has slid -4.3% on a year-to-date basis against Sterling. Treasuries also fell last week as yields on the 10-year US Treasury climbed to 4.5%.
Meanwhile, we saw broadly positive news for the UK as the economy grew 0.5% in February, driven by stronger services output. The UK economy grew 1.4% on a year-on-year basis, which exceeded expectations.
Whilst short-term volatility can be unsettling, our globally diversified approach to investing across asset classes, market caps, and investment styles continues to provide a strong foundation for navigating these turbulent times.
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The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 14th April 2025.
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