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Trump’s tariff announcement came Wednesday like an underwater earthquake, and its tsunami put an unprepared stock market deep underwater.
The S&P 500 (^GSPC) closed down 4.8% Thursday and nearly 6.0% Friday. It closed at 5,074, 17% off from February’s high, as investors appeared wholly unprepared for Trump’s “baseline” reciprocal tariff rate of 10%, with higher duties on a number of countries.
It was the worst week for the S&P 500 and Nasdaq Composite (^IXIC)since a global pandemic brought the world to a halt in March of 2020. Our Chart of the Week is likely the one you kept refreshing for the past few days.
And if the initial news wasn’t bad enough, China matched the US’s 34% tariffs with levies of the same measure, sparking the extended selling early Friday morning.
After the China tariff announcements, President Trump took to social media to spray his thoughts, writing in part, “MY POLICIES WILL NEVER CHANGE.”
To put it mildly, that is clearly not what the market wanted to hear. Stocks continued their free fall throughout Friday’s session.
The growing market fear is that escalation of the trade war could send the S&P 500 even lower as economists argue the risks of recession are rising. This prompted markets to price in more than four interest rate cuts from the Fed this year, the most rate cuts investors have priced in at any point in 2025.
The prevailing reason the Fed would cut two more times than its median forecast, projected at its latest meeting just two weeks ago, comes from fears that the economy will weaken more than initially thought. If the unemployment rate — now at 4.2% — spikes as growth slows, the Fed would cut to protect its maximum mandate, so the theory goes.
And it’s what the president himself says he wants, in line with the administration’s apparent preference for lower rates over higher stocks.
But through a more than 30-minute chat with the at the Society for Advancing Business Editing and Writing Annual Conference, Fed Chair Jerome Powell gave no indication that such a theory is the base case scenario right now.
“It’s just too soon to say what the appropriate monetary policy response will be to these new policies,” Powell said. “We can’t say with any confidence today.”
From utterly underestimating Trump’s trade war tactics to nosediving stocks and a hawkish Fed pouring cold water on rate-cut optimism, the market just isn’t getting anything it wants.
As stocks have fallen, there has been growing discussion about the various “puts” — or levels where a policymaker would step in to stop the chaos and help financial markets.
Through the first week of the sell-off, there doesn’t appear to be any “Trump put” in play.
Powell had every opportunity to lean into the market’s rate cut hopes on Friday, and he chose not to.
So no, there’s no “Fed put” in play either, at least at these levels. And so for now, that leaves few investors wanting to put money to work in a market where no one seems to have confidence in where things are headed next.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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