Markets Await Trump's Tariff Decision Amid Rising Inflation Concerns

Market Recap (April 2, 2025)

$S&P 500(.SPX)$ : +0.4%
$NASDAQ(.IXIC)$ : +0.9% (broke 4-day losing streak)
Dow Jones: -0.1% (flat)

Key Market Themes:

U.S. Labor Market Softens But Remains Resilient

Job Openings to Unemployed Workers Ratio: 1.1x (lowest since 2021, but still high historically).
Hires to Layoffs/Discharges Ratio: 3.0x, signaling a slowdown.
Quits Rate: Elevated, indicating worker confidence.

Labor market weakness could limit the Fed’s flexibility, but it’s not weak enough to justify rate cuts just yet.

Tariff Anxiety Reaches Peak Ahead of “Liberation Day”

Tariffs

Trump expected to announce new reciprocal tariffs targeting trade partners with high duties on U.S. goods.
Uncertainty over inflation impact: Will the new tariffs be “business-friendly” or add fuel to the inflation fire?
Fed Officials Warn: Richmond Fed President Barkin highlights tariffs could have a bigger impact than in 2018-2019 due to already high consumer prices.

If tariffs trigger higher costs, the Fed may stay hawkish longer, keeping rates higher for an extended period.

Tech Stocks & Market Leadership Rotation

MAG

Historically, after underperforming the S&P 500 for 100 days, Tech rebounds. This cycle has been different (last time this happened was 2012-2013).
$Tesla Motors(TSLA)$ : Surprisingly outperforming the S&P 500 over the last 100 days.
$Meta Platforms, Inc.(META)$ : Developing high-end AR glasses (code name: Hypernova), priced at $1,300+ to rival $Apple(AAPL)$ .

If history repeats, Tech could see a multi-year rally, but uncertainty over tariffs is keeping investors cautious.

Economic Data Flashing Warning Signs

ISM Manufacturing Index (March): 49.0 (contracting, first decline this year).
Prices Paid Index: Highest since June 2022, rising 14.5 points in two months—suggesting inflation pressures are back.

US factory activity

If inflation keeps rising while economic growth slows, stagflation fears will return.

Outlook for Q2 2025: Positioning for Volatility

Stick to Large Caps: The S&P 500 expected to outperform global stocks in Q2/Q3. Watch for Tech Rotation: If the 100-day underperformance rule holds, Tech could be setting up for a rebound. Stay Cautious on Small Caps: The Russell 2000 is not oversold enough to be attractive. Defensive Sectors in Focus: Utilities, Healthcare, Staples offer protection if tariffs hurt sentiment.

April 2 – “Liberation Day” Tariff Announcement

April 5 – March Nonfarm Payrolls Report

Final Thought: Markets are on edge, bracing for Trump’s tariff decisions and inflation signals. Will “Liberation Day” bring clarity, or is this just the beginning of another trade war cycle?

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