The Dow Jones Industrial Average (^DJI) dipped 2,231.04 points on Friday, April 4, 2025, after China announced retaliatory tariffs in response to US tariffs, closing 5.5% lower. The plunge continued into the week, with stock futures plunging further, set to open sharply lower on Monday, April 7, 2025.
Dow Futures Dip
Dow futures dipped 1,250 points or 3.3%, while the S&P 500 futures dipped 3.7%, while the Nasdaq futures were down 4.6%. Asian markets were not spared, with the Nikkei down 8% on market open.
US oil was down over 3%, below the $60 a barrel price last reached in April 2021. Oil prices have dipped as investors fear tariffs could trigger a global recession that would lower demand for energy in shipping, aviation, travel, and transportation. The crypto market was not spared, with Bitcoin dipping below $80K after hitting $100K shortly after Trump took office.
Selloff To Continue On Monday – Dow To Dip Further
Analysts expect the selling pressure to continue Monday as markets react to the lack of clarity on tariffs. The markets fear economic growth will slow, which could potentially trigger a recession. New reciprocal tariffs are set to kick in on Wednesday, April 9, 2025, affecting nearly 90 countries globally.
Likely Impact Of Tariffs
While President Trump has said he is open to negotiations, if the tariffs that kick in on Wednesday are maintained, it could cause economies to slide into recession in 2025. According to JP Morgan, the risk of a recession is currently at 60%.
Trump has held meetings with numerous leaders around the world, but that has not calmed investors. Trump is set to host Israeli PM on Monday, with tariffs set to feature in their discussions. The market reaction is due to fears tariffs could raise prices for businesses and consumers, which could lower their spending power.
Fed Chair Jerome Powell acknowledged on Friday that the tariffs were much higher than they had anticipated. He believes they will drive up prices and slow down growth. However, the Fed would not rush to act and would instead monitor the impact.
How To Invest amid Tariff Upheaval
One of the main tips to avoid potentially disastrous outcomes is to avoid drastic moves. Any move made right now will potentially be driven by emotion, which will act against your best interest.
A good potential strategy right now would be to wait and watch. In the coming months, the markets will experience heightened volatility, which should be a major consideration in any investment decision.
If tariffs are temporary, any risk you take now could potentially be rewarded. However, you should be aware that an aggressive stance could potentially lead to higher margin pressures and interest rates.
The best strategy right now would be aggressive diversification to mitigate some of the inflation risks, while EU bonds could potentially act as a buffer for deflationary risk.
To Summarize
Historically, markets tend to recover much stronger after a crisis driven by increased uncertainty. It is important to closely monitor your portfolio to ensure there is enough diversity in asset classes, and geographies. Another potentially great move is to drip feed your portfolio to help you ride the wave.
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