Fear is gripping financial markets, triggered largely by President Donald Trump’s recent tariff announcements. The volatility has been palpable, with Hong Kong stocks plunging 14% on Monday, marking the most significant drop since the Asian Financial Crisis in 1997, while Taiwan and Japanese equities slid 10%. European markets have not fared much better, with the FTSE 100, DAX, and CAC 40 all facing declines of over 5%.
Not even the cryptocurrency markets escaped this turmoil. Bitcoin (BTC) dropped 10% over 24 hours, falling below $75,000, and ether (ETH) plunged a staggering 22%. XRP and SOL also experienced declines of more than 20%, while Dogecoin (DOGE) fell by over 15%. Meanwhile, Bitcoin’s dominance has increased, rising to 63%, a level not observed since early 2021. The CoinDesk 20 index, which reflects the broader crypto market, has lost nearly 12% in the past day.
As for U.S. equities, the S&P 500 begins the week already deep in bear market territory, down 20% from its all-time high and showing a further 5% drop in pre-market trading. This sets the stage for what could potentially be the worst three-day performance in the history of the index.
China’s stock market, witnessing a 7% drop, is reportedly contemplating front-loading stimulus measures to mitigate the tariff impacts. Recently, the country announced a reciprocal 34% tariff on all U.S. goods, escalating tensions further.
In a recent statement on Truth Social, Trump emphasized the need for tariffs, stating, “We have massive financial deficits with China, the European Union, and many others. The only way this problem can be cured is with tariffs, which are now bringing tens of billions of dollars into the U.S. They are already in effect, and a beautiful thing to behold… We are going to reverse [the deficit], and reverse it quickly. Someday people will realize that tariffs, for the United States of America, are a very beautiful thing!”
Given this tumultuous landscape, where can investors find refuge? Currently, U.S. bonds appear to be the safe haven. The 10-year Treasury note is up 8% year-to-date, while the iShares 20+ Year Treasury Bond ETF (TLT), which tracks the longer end of the yield curve, has increased by 6%. This influx of investment into government debt is driving yields lower, much to the administration’s relief.
Seasoned investor Bill Ackman remarked that Secretary of Commerce Howard Lutnick seems undeterred by the prospect of an economic downturn, suggesting a potential strategy to profit from the situation with a long bond position.
Looking ahead, it is crucial to monitor other countries’ attempts to sidestep the tariffs. Nations such as Argentina, Taiwan, and India are already showing early signs of concessions, possibly removing tariffs on U.S. imports. This ongoing uncertainty around negotiations is expected to keep markets volatile, particularly as the Volatility S&P 500 Index (VIX) has recently surged, hitting levels not seen since August 2024.
What to Watch
Crypto:
- April 7, 8:30 p.m.: Syscoin (SYS) activates the Nexus upgrade on its mainnet at block 2,010,345.
- April 9: The Mercury network upgrade is applied to the Neutron (NTRN) mainnet.
- April 9, 10 a.m.: U.S. House Financial Services Committee hearing about updating securities laws for digital assets.
- April 10, 10:30 a.m.: Status conference for former Terraform Labs CEO Do Hyeong Kwon at the U.S. District Court for the Southern District of New York.
- April 11, 1 p.m.: U.S. SEC Crypto Task Force Roundtable on crypto trading regulations.
Macro Events:
- April 9, 12:01 a.m.: Tariffs implemented on imports from top U.S. trade deficit countries.
- April 9, 12:01 p.m.: China’s retaliatory tariffs on U.S. imports take effect.
Earnings: No earnings scheduled.
Conclusion
The current financial landscape presents unprecedented challenges and opportunities. With ongoing global trade tensions and market volatility, investors must remain vigilant and informed. Keeping a keen eye on developments, especially regarding tariff negotiations and market reactions, will be crucial for navigating this tumultuous environment.
