On Friday, U.S. stock markets opened down sharply. This drop came after an extraordinary social media rant by then-presidential candidate Donald Trump, claiming that China was “totally violating” its trade deal with the US. This announcement coincidentally came at the same time that new economic data started pouring in. That stark picture was accompanied by an unexpected dip in consumer spending and a more surprising easing of the Federal Reserve’s favorite inflation measure for April.
Trump’s accusations came amid an ongoing legal struggle regarding his administration’s tariffs on Chinese imports. A federal appeals court recently granted an emergency stay of the Court of International Trade’s decision that sought to enjoin these tariffs. This decision keeps Trump’s whole additional tariff agenda in limbo.
The market response reflected this turmoil. Despite the good news, on Friday, the broader S&P 500 index was down 0.35%. The tech-heavy Nasdaq Composite fell by exactly as much on a percentage basis. Although it may seem hard to believe with recent market declines, the S&P 500 has rapidly gained ground ever since the beginning of April. It has risen more than 6% during the month. This strong performance makes it one of the index’s best months since early 2023. It even has the chance to score its highest May numbers since 1990!
As all of this was happening, the U.S. dollar index is on track for a dismal month. This trend is an early indication of increasing nervousness in the market. Analysts have been watching closely the confusing signals coming from consumers, with their behavior and outlook on the economy going in opposite directions.
Ulrike Hoffmann-Burchardi, Chief Investment Officer of global equities at UBS Global Wealth Management, called it “a bad move.”
“We expect bouts of market volatility ahead as investors continue to navigate a range of market, economic and geopolitical risks.” – Ulrike Hoffmann-Burchardi
In light of Trump’s comments, he expressed his frustration with China’s actions in another statement.
“The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US.” – President Donald Trump
Stock market regain
Since that low in April, many market watchers have noticed a marked recovery in the stock market. Concern over tariffs and the future of international trade relations is far from over. Analyst Clark Bellin noted how added complexities on tariff negotiation could exacerbate the volatility.
“Even though the stock market has staged a decisive rebound since the April lows, there is still plenty of uncertainty on tariffs, especially given the legal battle that is brewing over the ‘Liberation Day’ tariffs.” – Clark Bellin