Well Trump has announced his extensive list of tariffs to be imposed on all of our global trading partners. The tariffs are plenty big–and range from 10% up toward 50-75%–I watched the ‘show’ on TV and don’t really have much to say about it except likely no good will come of it as far as equity and interest rates markets are concerned.
Right at this moment (8:30 PM central) all markets are down sharply. DJIA off 2%, S&P500 off 3% and NASDAQ almost 4%. Even Bitcoin is off by 4 1/2%.
The 10 year Treasury is trading at an incredible 4.07%–down 13 basis points.
We all know this is the futures market–where markets open and trade tomorrow remain an unknown. We will just have to tune in 10 hours from now to find out what happens. As always there is not one thing you can do about this movement and it is way too late to try exiting the markets–hang on.
As a hedge for my preferred portfolio, I have been as high as 60% short (600 short pfd shares per 1,000 shares long). On down days I flip them. Today, I have also closed a few as well. Some long index LEAP puts have helped.
It’s not a winning strategy but it softens the pain. Surprisingly, the down move was orderly – nothing like most days in 2008. Oh well, tomorrow is another day, maybe?
VIX is at 26.5 today might be a nothing burger.
As Warren Buffett recently said , “tariffs are not paid for by the tooth fairy”.
The cost of purchases will increase worldwide as countries increase tariffs in response. Naturally, if people have to pay more for what they are buying, they will buy fewer items. To the extent that consumer spending drives economic growth, there will be an impact. Where does the money go? To governments around the world. Just another form of a tax.
I am not sure if we have ever seen a worldwide simultaneous increase of governments collecting money from people.
Everybody can have a prediction. Nobody can point to a modern-day history of this occurring.
– This should be a very, very good day for preferreds. Not so much so for diversified portfolios.
— Pharmaceuticals are said to be exempt. Not clear if ingredients are exempt. Many US drugs use ingredients from countries like India and China. Too early to cheer – there is talk pharma tariffs may be added later. IMHO, may be time to lighten up on pharma while the going is good – likewise health insurers.
— Food imports are apparently covered, discusion of rice, poultry and beef in the press conference and fact sheet. Risk is of retaliation US grain exports. Some type of farmer bailout is anticipated.
— Canadian crude oil (and potash) are apparently subject to the 10% fentanyl tariff. Oddly as I read the Fact Sheet (linked), it seems that if the “fentanyl tariff” is removed, oil and potash may become subject to a higher 12% reciprocal tariff. (Clear as mud – DYODD. ) IMHO, with today’s drop in crude and current low retail gas prices, US refiners should be okay. Unless the proposed new port fees / docking taxes go into effect impacting Gulf refineries. Or a new “retaliation to retaliation” tariff goes into effect.
https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-declares-national-emergency-to-increase-our-competitive-edge-protect-our-sovereignty-and-strengthen-our-national-and-economic-security/
Long: energy, Ag, pharma. JMO. DYODD.
Great broad recap. At 7am NY, I see the premkt Tsys nominally lower ( 7~10bp ). With all the worldwide equity drop…. surprised not lower rates.
Would that as the morning premkts come on should be lower rates ??
DXY at 101.75 ish.
Again, thanks Bear
Jim,
the way you started that comment I thought you were going to tell a story about a female conquest!
My mind is in the gutter, always
eventually good – lots of times on big downdrafts, preferreds get thrown out with the bath water to recover later. In the end, they should do well in the lower interest environment (recession?).
On any given day, the markets can be emotional and reactive. 36% of my preferred investments are in utilities. They have had a poor YTD. Everybody has their approach. DYODD. Just sharing mine for what it’s worth, including the lackluster YTD performance. I am holding and observing.
Bear, you see the drop in OKE ?
Preferreds might be down today like if credit risk was to be priced in. This will ultimately provide for terrific buys as it is way too early to price in credit risk.
SPY 2021 high is 480 and still a long way away and was already a very euphoric level of equities. Nothing happens to credit (after the emotions subsides) till we break that, which we may well do but that’s a story for another day. Happy hunting to those who enjoy this kind of stuff.
I have my shopping list. I’ll leave it at that.
Porky I want some good deals and no one is taking the bait.
Looks like all will be down except the yellow stuff. Brit Pound up, as is Loonie. Guess they haven’t heard that Canada is supposed to devalue theirs.
Oogly time has come.
U.S. companies dominate the world. What Trump might really be doing is clearing away trade barriers, i.e. other countries tarrifs, for them. These countries cannot afford to be shut out of our markets and will fold. I bet global tarrifs, on a net basis, will be lower than they are now in 6 months.
The initial market reaction is typically wrong. This is clearly U.S. positive. For treasures and U.S. multi-nationals.
Bessent knows what he is doing.
Dan
100% agree and truly appreciate your post.
Crisis = Opportunity
I am Azure
I think this was poorly communicated, and while the goal is laudable, the methods are suspect. using a tariff rate based on a fictitious rate imputed by dividing one countries imports v our exports to that country is crazy.
For example, we will never be a net exporter to Vietnam or any lower wage country.
LT –
” using a tariff rate based on a fictitious rate imputed by dividing one countries imports v our exports to that country is crazy.”
Correct. The 46% tariff on goods exported from an ally like Vietnam is insane. It is going to really hurt so many top quality American retailers. Not possible to start opening hundreds of clothing and textile mills in USA again.
These aren’t reciprocal tariffs – they are highly punitive tariffs.
Have to hope that many Americans will learn that elections have consequences.
I came into today 60% cash invested in Treasury MMFs, CDs, and I-bonds. Like many on this site, am hoping to find some great buys after this starts to bottom. PFF down only 2.5% in 2025, so we may have a ways to go here.
The market reaction has long been overdue. Have the popcorn out. Lets see if we can move towards that 20% correction target.
What exactly is a foreign country going to do? Lower their tariffs? It will not correct the problem, the way Bessent, Navarro, and others have calculated the rate they are charged. In my view, there is hardly the sign of somebody who knows what they are doing.
“For example, America’s trade deficit with China in 2024 was $295.4 billion, and the United States imported $439.9 billion worth of Chinese goods. That means China’s trade surplus with the United States was 67% of the value of its exports — a value the Trump administration labeled as “tariff charged to USA.”
““While these new tariff measures have been framed as ‘reciprocal’ tariffs, it turns out the policy is one of surplus targeting,” noted Mike O’Rourke, chief marketing strategist at Jones Trading, in a note to investors Wednesday.
“There does not appear to have been any tariffs used in the calculation of the rate. The Trump administration is specifically targeting nations with large trade surpluses with the United States relative to their exports to the United States,” he added.”
https://www.cnn.com/2025/04/03/economy/reciprocal-tariff-math/index.html
> This is clearly U.S. positive. For treasures and U.S. multi-nationals.
It’s been extremely positive for my /ES short position.
You aid you would be short and you were. Excellent. Stay that way.
I hold a portfolio of 100% IG Corporate bonds for the income stream and not for capital appreciation. I’ll make no moves on the drop in rates. Just another day. Yawn!
These are the times when I’m glad I hold some bonds. Eventually, if the equities go down enough, I will sell some of my bonds and buy. For now, I’ll just continue to reinvest my dividends and interest.
I watched too, mainly to say I had witnessed this event for better or worse. I intend to to do nothing but some yard work and ride my bike tomorrow and maybe for the foreseeable future until there is some clarity in the situation. Kind of reminds me about the Jerry Clower story about the dude who went up a tree to shake a coon down while coon hunting with friends at night and encountered a lynx instead. “Just shoot up amongst us, one of us has got to have some relief!” I’ll bet most folks don’t know who Jerry Clower was. Guess I am a redneck to know myself!