Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
Investment and Options Strategist
Markets began the week cautiously, rising slightly on March 31 as investors hoped for tariff relief. However, optimism quickly faded on April 2 as President Trump’s extensive tariffs were unveiled, triggering a major global sell-off. On April 3, the S&P 500 plunged -4.84%, Nasdaq -5.41%, and Dow -3.98%, led by tech declines such as Apple (-9.2%) and Nvidia (-7.8%). Selling intensified further on April 4, with the S&P 500 dropping an additional -5.97%, erasing over 320 points amid recession fears. European equities mirrored declines, notably on April 3 with the DAX (-3.0%) and CAC 40 (-3.3%), particularly hitting autos and banks. Asian markets also slumped, with Japan’s Nikkei down -8.7% by week's end.
Market volatility initially rose moderately early in the week but escalated sharply after Trump's April 2 tariff announcement. The VIX surged, peaking at 45.31 (+50.93%) on April 4, its highest since the early COVID pandemic. Short-term volatility also spiked dramatically, with VIX1D reaching 81.89 (+142.06%), reflecting extreme short-term market anxiety. Elevated volatility persisted through the end of the week, suggesting ongoing market uncertainty.
Cryptocurrencies started the week with minor gains but turned volatile after tariff announcements. Bitcoin initially edged up on March 31, reaching around $83,272, but reversed sharply by April 4 to settle at $75,699 (-3.43%). Ethereum and XRP saw similar declines, dropping to $1,506 (-4.64%) and (-11.70%), respectively. Crypto stocks faced mixed outcomes amid broader market pressures, reflecting investor caution.
Bond markets began the week relatively steady but rallied significantly following the tariff-induced equity sell-off. The US 2-year Treasury yield dropped notably, ending the week down 22 basis points at 3.64%, signaling increased expectations of aggressive Fed rate cuts. Japanese bond yields similarly fell sharply amid heightened recession concerns, underscoring broader global flight-to-safety.
Commodity markets initially showed resilience early in the week, but faced a sharp downturn post-tariff announcements. Copper experienced significant volatility, briefly dropping 7% amid growing recession fears. WTI crude also slumped dramatically below $60/barrel before stabilizing modestly. Gold traded steadily near $3,100, supported by safe-haven demand, while silver faced sharp declines, erasing year-to-date gains due to recession fears.
Currency markets were notably volatile throughout the week, particularly after tariff announcements. Safe havens CHF and JPY strengthened significantly; USDJPY briefly dipped below 145.00 on April 4. Pro-cyclical currencies, including AUD and CAD, initially weakened substantially but partially recovered towards week-end as markets adjusted to ongoing uncertainty.
Markets face a crucial week with several major economic indicators and policy events: