Financial Markets Experienced Volatile Swings During the Initial 100 Days of President Trump's Term.
Here Comes the Financial Rollercoaster: Trump's First 100 Days
Stock markets have been on a chaotic journey ever since President Trump took office, with the White House's erratic tariff policies leaving companies and investors guessing about the economic landscape.
President Trump campaigned on stirring things up, and damn, did he deliver. Wall Street's been shaking ever since.
The stock market's been on a wild freakin' ride since Trump's swearing-in ceremony. The S&P 500 plunged one of its worst nosedives in decades earlier this month following Trump's announcement of the "Liberation Day" tariffs on April 2. A week later, when Trump declared a 90-day halt on most of those duties, stocks celebrated their biggest rally since 2008.
The Cboe Volatility Index (VIX), a.k.a. the "fear index," hit its highest level since March 2020 the day before the "Liberation Day" tariffs came into effect. Although it's dropped from its peak, as of Tuesday, it was still nearly 10 points—that's roughly 50%—higher than when Trump took office. By Tuesday's closing, stocks had recouped almost all their "Liberation Day" losses. But with tariffs on China still 145% higher than at the start of the year and no major trade deals announced since the tariffs were paused, there's still a heap of uncertainty plaguing Wall Street.
Bonds and the Dollar Aren't Faring Much Better
Trump's tariffs have sent tremors through bond and currency markets. Treasury yields took a nosedive during the early stages of Trump's second term as investors got their first taste of the president's unpredictable, ever-shifting trade policy. Economists warned tariffs would dent economic growth and raise costs; this resulted in a sharp drop in consumer and business confidence.
The 10-year Treasury yield dipped to a 6-month low around the time of "Liberation Day." Yet something unexpected happened: yields soared as bonds were dumped, despite no notable change in the tariff or economic outlooks.
At the same time, the U.S. dollar, a traditional safe haven for global investors, slumped. The simultaneous sell-off of Treasury debt and U.S. dollars seems to indicate that the world's investors are avoiding U.S.-based assets, a phenomenon some experts call the "Sell America" trade.
Searching for Sanctuary in Gold and Bitcoin?
In this whirlwind of economic uncertainty, two assets have caught our attention: gold and bitcoin. Gold prices have hit all-time highs this year, fueled by a flight to country- and currency-neutral safe havens. As of Tuesday, gold was trading at around $3,325 an ounce, up by more than 21% since Trump's inauguration.
Bitcoin has struggled so far this year, with Tuesday's value down more than 10% since Trump took office. However, Bitcoin fans see hope in the correlation between Bitcoin and stocks weakening. This decrease in synchronization may be a sign that Bitcoin is finally living up to its potential as a safe haven asset.
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Enrichment Data:
President Trump's tariff policies during his first 100 days in office have significantly impacted the investment landscape. Here are some key details:
Tariff Policies
- Broad Tariff Impositions: Trump imposed a wide variety of tariffs on imports from countries such as Canada, Mexico, China, and others. A 10% base tax was slapped on most products, while tariffs were raised on imports based on trade deficits with specific nations.
- Reciprocal Tariffs: The implemented tariffs are reciprocal, mirroring the tariffs these countries place on U.S. goods. For examples, China faces substantial tariffs—up to 200 or 300% in certain cases—reflecting its higher tariffs on U.S. products.
- Temporary Tariff Suspensions: Although the initial tariff policies were strict, Trump has shown flexibility by suspending some tariffs for 90 days to encourage negotiations and favorable trade agreements.
Impact on the Investment Landscape
- Market Volatility: Tariffs have increased market volatility, as investors question the future of trade agreements and potential retaliatory measures from trading partners.
- Trade Disruptions: Supply chain disruptions have affected businesses reliant on international imports, leading to increased operational costs and potential investment losses.
- Negotiation Prospects: The Trump administration's intention to negotiate several trade deals in a short span has generated both opportunities and challenges for investors. Successful negotiations could stabilize trade and boost investment confidence, while unsuccessful negotiations could exacerbate tensions and instability.
Economic and Public Perception
- Economic Impact: Public opinion suggests that Trump's focus on tariffs has influenced his economic approval ratings. Many Americans believe the administration should prioritize lowering costs instead of imposing tariffs.[2]
- Global Trust and Confidence: Trump's aggressive tariff policies have raised concerns worldwide about the dependability of the U.S. as a trading partner, which could result in decreased foreign investment in the U.S. [3].
- The ongoing tariff policies instigated by President Trump during his first 100 days have resulted in significant effects on the global investment landscape, creating an unforeseen rollercoaster for the stock market.
- The stock market has been on an exceptionally volatile ride, as demonstrated by the S&P 500's dramatic plunges and subsequent rallies, influenced by the fluctuating "Liberation Day" tariffs.
- The Cboe Volatility Index, known as the "fear index," reached its highest level in nearly a decade during the implementation of the "Liberation Day" tariffs, indicating a heightened sense of uncertainty in the market.
- Amidst this economic unpredictability, assets like gold and bitcoin have garnered increased interest as potential safe havens for investors seeking protection from adverse financial effects.
- While bitcoin struggled initially during Trump's presidency, its decreasing correlation with stocks could signal a step toward Bitcoin's emergence as a reliable safe-haven asset.
