Some facts about today’s market
On April 3 as of the close of the stock market, the Dow Jones Industrial Average Index was down (1679) points or almost (4%); the S&P 500 Index was down almost (275) points or (4.84%), while the tech heavy NASDAQ Index was down (1050) points or almost (6%). It was the worst day in the stock market since 2020.
This was a result of President Trump’s ‘Liberation Day’ where he instituted a minimum 10% tariff on ALL goods imported from ALL foreign countries as well as reciprocal tariffs on nations that impose tariffs on US exports. The countries that had tariffs higher than 10% included the European Union, China, Vietnam, Japan and Israel. The 10% tariffs go into effect on April 5 and the higher reciprocal tariffs go into effect on April 9. President Trump stated, “We will charge them approximately half of what they are and have been charging us.” Canada and Mexico are not subject to these tariffs for now. Economists have warned the President the actions will cause increased prices for US citizens.
The Fallout
The decline in the market affected most stocks and many sectors. The hardest hit sectors were discretionary, energy and technology. Interestingly, consumer staples posted modest gains. The market also took down some stalwarts including oil, gas and even gold. Even bonds felt the decline with the 10 yr. Treasury note currently yielding a little over 4%. A month ago, yields were a bit more than 5%.
There are now fears of a US recession and the potential for rising inflation. We may see near term GDP growth slow or even dip into a contraction that could push inflation from its current, fairly normal level of 3% up to 4.5%+.
A bit of good news is that mortgage rates tend to follow the 10 yr. Treasury note yields, so we could see slightly lower mortgage rates in the near future. Although given the current environment, the housing market could continue to have issues as many consumers will not feel confident enough to purchase a home in this market environment.
Stay focused
The future is unknowable and unpredictable. While today’s news is unsettling, the same principles still apply. Long-term success in investing is built on discipline, diversification, and patience. A thoughtfully constructed portfolio is designed to weather uncertainty and take advantage of shifting conditions without relying on prediction.
By staying focused on long-term goals and avoiding short-term reactions, you give yourself the best chance of reaching your objectives, no matter what the market cycle brings.
Your investment strategy should not be based on reacting to headlines or trying to guess what the market will do next. Warren Buffet once said, “Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas.”