Hollywood script live: US stock exchanges are feverish amid fake news about tariffs
7 April 18:20
U.S. stock indices are showing record volatility amid news of U.S. President Donald Trump‘s tariff policy, and this news can sometimes be fake, Komersant ukrainskyi reports citing Bloomberg.
Stock exchanges and “fake news”
Thus, the S&P 500 index made an unprecedented jump of more than 7% in one trading day, first falling by 4%, then rising by more than 3%, and then returning to negative dynamics.
As of 17:42 Kyiv time, the S&P 500 was losing 2.2%, the tech-heavy Nasdaq 100 was down 1.7%, and the small-cap Russell 2000 was down 2%. The VIX volatility index, known as the “fear index,” jumped above 50, the highest level since the start of the COVID-19 pandemic.
“Given the volatility and high trading volumes, every move is amplified – both up and down. That’s why we moved away from the highs so quickly. But the price dynamics, when stocks jumped on the expectation of a pause in tariffs, showed that traders still don’t want to miss out on any rally,”
– explains Steve Sosnik, chief strategist at Interactive Brokers.
Representatives of the Trump administration are actively trying to reassure investors, assuring them that tough tariff measures will not destroy the economy. At the same time, an interview with Kevin Hassett, director of the National Economic Council, was misinterpreted as a hint that the implementation of the harshest tariffs might be postponed.
After that, a number of media outlets and social media spread the news of the possible postponement of tariffs, and against this background, the stocks recovered their four percent drop of 3%. However, after the White House announced that they had not heard anything about the postponement, the stock fell again.
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Forecasts and expectations
Leading investment banks are massively lowering their forecasts for the US stock market. JPMorgan Chase cut its year-end forecast for the S&P 500 from 6,500 to 5,200 points, joining Evercore ISI, Goldman Sachs, Barclays, and Yardeni Research, which also revised their expectations.
Hedge funds recorded the largest-ever one-day net selling of global stocks on the first day of trading after Trump’s announcement of sweeping tariffs, according to Goldman Sachs’ prime brokerage unit. UBS analysts warn that the S&P 500 could fall to 4,675 points.
Many economists expect the tariffs to trigger a price shock. A universal 10% tax on imports could lead to a 1 percentage point increase in US consumer prices from the latest 2.8% figure, according to Ned Davis Research.
“Trump’s representatives say their goal is to make Main Street rich again, even if it’s bad for Wall Street. The problem is that Main Street owns a lot of the stocks traded on Wall Street, so the two streets prosper and suffer together,”
– Ed Yardeni of Yardeni Research wrote in a note to clients.
On the derivatives market, traders expect further volatility. Option activity shows that traders are forecasting the S&P 500 to fluctuate by 5.6% this week, the highest since the quarantine. On Monday alone, the benchmark equity index is expected to fluctuate by 3.3% in either direction.
The US is on the verge of recession
Leading investment banks have sharply raised their forecasts of the likelihood of a recession in the United States over the next 12 months.
Goldman Sachs increased its estimate of the probability of a US recession from 20% to 35% immediately after the tariffs were announced. Today, on Monday, Goldman Sachs estimates this possibility at 45%, according to Reuters.
The background for this is a sharp deterioration in financial conditions and growing policy uncertainty, which is likely to lead to a greater reduction in capital expenditures than previously forecast, the bank believes.
Last week, several other investment banks revised their recession risk forecasts. In particular, J.P. Morgan estimated the probability of a recession in the US and the world at 60%.
