#242: Tariffs & Stocks - timeline so far
In this email:
Quick recap of post-liberation day stock market
Historical swings - a visual comparison
What to do till end of year?
Since liberation day
Since April 2nd - dubbed "liberation day" - SPY has staged a significant rebound, rising 5.26% through May 16th.
This rally follows a sharp decline in late March and early April, marking a notable shift in investor sentiment.
The recent uptrend suggests renewed confidence in the broader market, despite ongoing volatility and macroeconomic uncertainty.
4/2: Trump rolled out his tariff policy at a “Liberation Day” event at the White House, releasing details of the plan that showed nearly all countries (even uninhabited ones) facing tariffs ranging from 10% and 50%
4/9: In a stunning about face, Trump announced on Truth Social he was pausing the worst of his tariffs on most countries for 90 days, though he would continue a baseline 10% tariff rate and raise his tariffs on most Chinese goods by 125%
5/12: Bessent and Chinese officials announced Monday a 90-day pause on the worst of the two countries’ tariffs on the other’s goods, with the U.S. lowering its tariff rate on most Chinese goods to a combined 30%, which includes both the “Liberation Day” tariffs and the 20% tariffs the Trump administration had previously imposed—and is far below the 80% figure Trump floated (from Forbes)
Historical swings - a visual comparison?
If you filter out to instances where SPY dropped 12% or more in 6 calendar days, we come down to two instances — Covid-19 and Liberation Day
Both events saw sharp initial declines in SPY with the Covid-19 sell-off (blue line) showing a deeper and more prolonged drop, bottoming with a ~25% decline, while the Liberation Day sell-off (orange line) was shallower and bottomed earlier
The Liberation Day episode rebounded more strongly and consistently, surpassing its starting level by the end of the observed period (rising to ~103.3), whereas the Covid-19 recovery was more volatile and ended below the starting point (~93.4)
According to the note below the chart, only two events (Covid-19 and Liberation Day) in recent history met the extreme condition of SPY dropping 12% or more in just 6 calendar days, highlighting the severity and rarity of such rapid drawdowns.
What to do till end of year?
💡 IMO:
It’s still a prudent choice into gradually buy into SPY. Each time I see a 1% (or greater) drawdown, I’d enter.
Like the trade war or not, it will continue to cause market volatility. I still like XLU (the utilities sector ETF) — a historically defensive sector, with a potential further gain from AI themes.
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To Tariff or not to Tariff, That is the Question. https://torrancestephensphd.substack.com/p/to-tariff-or-not-to-tariff-that-is