🤷 Tariffs... What tariffs?

What’s going on here?

Tariffs were meant to be as supportive of the US economy as baseball games and Central Park glizzies – but after stateside stock markets tanked, the president hit pause on Wednesday.

What does this mean?

Investors’ screen time will have been ludicrous lately – and not due to TikTok rabbit holes or family group chat drama, but because US tariffs create a headline a minute. With traders anxious over tit-for-tat taxes between China and the US, the Russell 2000 – an indicator of US economic growth – was reflecting a 79% probability of a recession early on Wednesday. The S&P 500 and prices of base metals (essential materials for tons of industries) suggested similar. Then, in a surprising one-eighty, the US president announced a 90-day pause on tariffs for countries that haven’t retaliated. That got rid of investors’ pessimism: they initially lit a fire under US stocks.

Why should I care?

For markets: Now scram!

Investors weren’t just concerned that tariffs would raise prices and fracture international relationships. They’re also not confident that the powers that be have a concrete plan – and if there’s one thing investors hate, it’s uncertainty. So they’ve been scrambling in different directions, cartoon-style. Institutions are switching to protective investments: cash, Treasury bonds, and put options. Retail investors, on the other hand, are taking more risks.

For you personally: Thanks a lot, Reddit.

The “buy the dip” mantra has long been drummed into retail investors’ heads. So you can see why they’ve been buying stocks the second they seem to be recovering, only to see their early wins wiped out within hours. And with the pulls and pushes strong enough to change portfolio balances by tens of thousands in minutes, even seasoned traders are becoming cautious. The temptation to “buy the fear” still exists – but you need a stomach of steel to wait for that strategy to pay off, especially as a lasting recovery would likely hinge on lasting policy changes.

What’s going on here?

Investors can’t seem to find safety anywhere, with the fallout from US tariffs pulling them out of even famously stable assets.

What does this mean?

The S&P 500 has fluctuated ever since reciprocal tariffs were announced. And long-term bond yields (or returns, which tend to rise as bonds are sold) have spiked, too, indicating that investors are even offloading a famously stable asset class. In fact, the MOVE index – which tracks volatility in the bond market – reached its highest point since October 2023, while Wall Street’s fear gauge reached a height rarely seen outside of full-blown crises.

Why should I care?

Zooming in: Not-so-safe havens.

Investors usually rally behind US Treasury bonds and the dollar when a crisis is brewing – but not this time. As well as stocks and bonds, the greenback has fallen out of favor, sliding against major currencies like the yen and euro. That rare triple whammy indicates that investors have become critically skeptical of US investments – even after a decade of world-leading performance. That may be why the US president made a U-turn, delaying the start date on many countries’ higher rates. Not China, though: it’s still tarred with levies well over 100%.

The bigger picture: Pride comes before a fall.

Leverage lets you amplify your trade and your potential takings… but the same is true for your losses. That’s been the case lately: ETFs doubling or tripling the exposure to single stocks or indexes have lost up to 60% of their value in mere days. That one-two(-three) punch meant investors lost $25 billion from leveraged ETFs in just 48 hours last week – nearly a quarter of their value and the sharpest drawdown ever.