Another Day, Another Trade Headline: China’s Latest Moves + What It Means For Stocks and Bonds 4/11/25
Apr 11, 2025
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Adam Parker, founder and CEO of Trivariate Research, elaborates on equity strategy amid trade war worries. David Miracle, chief U.S. economist at Goldman Sachs, dives into recession risks as trade tensions escalate. Rick Santelli reports alarming dips in consumer sentiment, reflecting wider market implications. They discuss China's retaliatory tariffs on U.S. goods and the effects on stocks and bonds. Additionally, insights from major banks reveal consumer spending trends and the current state of the bond market, showing both challenges and resilience.
China's retaliatory tariffs on U.S. goods have escalated tensions, impacting both economies and complicating business operations for U.S. companies.
Despite rising bond yields and concerns over the economy, consumer spending remains resilient, buoyed by stable retail sales and bank reports.
Deep dives
Market Instability and Bond Yield Dynamics
The episode outlines the current volatility in the stock market, specifically highlighting the S&P 500's fluctuations, which have included both gains and losses throughout the week. A significant point of discussion is the recent sell-off in bonds and rising yields, with the 10-year yield surpassing 4.5% and concerns arising among bond traders about these trends. The increasing yields suggest a lack of confidence, with fears that institutional and foreign investors might be offloading U.S. assets, potentially signaling a decline in U.S. economic exceptionalism. Observers are questioning what factors might lead to a policy response from the Federal Reserve amidst these unstable market conditions, as confidence in the dollar and U.S. bonds comes under scrutiny.
Impact of U.S.-China Trade Relations
The tensions in U.S.-China trade relations are underscored by China's retaliatory tariffs, which have escalated to an astonishing 125% on American exports, following significant U.S. tariff hikes. This growing trade war is expected to have detrimental effects on the Chinese economy, with predictions that it could detract several percentage points from growth. U.S. companies are beginning to withhold shipments to China, indicating that the trade climate is significantly affecting business operations. There is also a focus on how Chinese enterprises are attempting to adapt by increasing domestic purchasing and potentially shifting production to bypass U.S. tariffs.
Consumer Confidence Amid Economic Concerns
Despite recent uncertainties in the market, consumer spending remains resilient, as indicated by a report highlighting stable spending patterns and optimistic retail sales figures. Analysts from major banks assert that, while there are signs of weakness in lower-income brackets, overall consumer financial conditions have not deteriorated significantly. J.P. Morgan and other banks have reported increases in card spending, suggesting that consumers are confidently navigating the economic landscape. However, the ongoing trade war and inflation expectations pose risks that could shape future consumer behavior and spending.
The Role of Federal Reserve in Current Market Conditions
Discussions surrounding the Federal Reserve’s potential interventions in the market have gained traction as analysts speculate about the impact of rising unemployment and inflation pressures. With a significant probability of recession lingering, the Fed is anticipated to consider rate cuts if economic indicators worsen. The conversations reflect a broader concern regarding inflation expectations, which have surged, prompting the Fed to navigate between supporting economic growth and controlling inflation. Analysts emphasize the importance of establishing credibility in U.S. assets, which may hinge on the Fed's responses to fluctuating market conditions and investor confidence.
S&P, Dow, and Nasdaq all on pace for gains week-to-date, despite another volatile first hour of trade: Sara Eisen, David Faber, and Michael Santoli broke down the latest as China strikes back with additional tariffs on U.S. goods and bond yields see another big jump. Consumer Sentiment coming in at multi-year lows before the team headed live to Beijing for a read from the ground – and Trivariate’s Adam Parker discussed his top picks here, along with Goldman’s Chief U.S. Economist -fresh off the firm’s quick turn on a recession call earlier this week.
Plus: A deep-dive into new numbers out of the Big Banks… JPMorgan, Wells Fargo, and Morgan Stanley all reporting results this morning: what they’re saying about the consumer – and President Trump’s tariff moves.
