According to Dow Jones Market Data, the Dow Jones Industrial Average lost nearly 1,000 points on Monday, reaching its worst April performance since 1932, writes The Wall Street Journal. According to Bespoke Investment Group, the S&P 500 performance since the inauguration has been the worst of all presidential terms since 1928.
Concerns about trade restrictions and the prospect of President Trump firing Federal Reserve Chairman Jerome Powell are causing investors to fear further losses. Few believe that the administration's negotiations with trade partners will yield results soon enough to ease the tension.
«This is a hallmark of trade without trust, — said Scott Ladner, Chief Investment Officer at Horizon Investments. — It's impossible to invest capital in an economy that is unstable and unknown due to policy structure». The company, based in Charlotte, reduced its positions in American stocks several weeks ago, favoring international securities.
In the weeks following Donald Trump's victory in the presidential election, major U.S. stock indices soared due to investors' hopes for tax cuts and deregulation, which could increase company earnings. But instead, the administration began imposing aggressive tariffs that threaten to raise prices and slow economic growth. Markets have not recovered even after the president canceled and postponed many of his tariff plans.
As the publication writes, bond prices usually rise when stocks fall, offering investors a hedge during stock market turmoil. But in recent weeks, this has not been the case. The yield on 10-year U.S. Treasury bonds, a key benchmark for borrowing costs, rose by 0.16 percentage points in April. Bond yields rise as prices fall, meaning investors are selling U.S. government bonds, which are rightly considered one of the safest and most reliable assets, even as stocks fall.
Concerns about the economy, along with Trump's growing feud with the Fed, are putting pressure on the U.S. dollar. The U.S. dollar index ICE — a measure of the dollar's value against a basket of major currencies — fell more than 1% on Monday to its lowest level in three years.
With other defensive strategies not meeting expectations, investors have turned to one of the oldest hedging tools — gold. On Monday, futures prices for this precious metal reached another all-time high. As Bloomberg writes, gold surpassed the $3,500 per ounce mark for the first time in history, with the metal rising nearly 40% over the year.
As a result, the mood on Wall Street is becoming increasingly gloomy. According to a weekly survey by the American Association of Individual Investors, the level of expectation for stock price declines among ordinary investors has exceeded 50% for eight consecutive weeks. This is the longest period in history, the investor group stated, based on data since 1987.
Meanwhile, Trump's trade war is pushing other countries to unite and conclude new free trade agreements, writes Politico. France, Belgium, and Austria, which previously held protectionist positions, have begun to see trade deals as a geopolitical necessity, and Brussels speaks of enormous interest in cooperation from foreign partners. In recent months, Brussels has completed years-long negotiations with the South American trade and economic union, as well as with Mexico and Switzerland. Negotiations are underway with Malaysia, the UAE, and India.