Trump’s tariff and Federal Reserve-bashing about-faces in April sent financial markets into a tailspin but also highlighted the mounting pressure on his administration to prevent the US economy from sliding into recession.
This erratic “threaten-retreat-threaten-retreat” cycle highlights the importance of investors biding their time. It’s better to wait until the true impact of his final decisions becomes clear instead of reacting to every tweet or decision he makes.
April was characterised by intense market upheaval as President Trump set what UBS economist Paul Donovan describes as an erratic “threaten-retreat-threaten-retreat” cycle in motion. Trump’s reversal of previous extreme policy decisions highlighted that economic realities are beginning to constrain the administration’s actions.
Now you see it, now you don’t tariff turmoil
On April 2, “Liberation Day” as he calls it, Trump announced sweeping reciprocal-but-not-really-reciprocal tariffs on 90 countries – triggering an immediate market meltdown when these were implemented a week later.
The announcement sent US markets into freefall. The Dow Jones plunged over 1 344 points (3.22%) while the S&P 500 dropped 176.96 points (3.15%) in a day. The following day brought even steeper declines, with the S&P 500 suffering its second-largest point drop in history and the Nasdaq experiencing its largest ever point drop. Global markets from Asia to Europe shared the pain, with Japan’s Nikkei 225 falling 2.8% and European indices declining by between 1.6 and 3.3%.
Yet barely three weeks later, on April 23, Trump unexpectedly announced a substantial reduction in Chinese tariffs, originally set at 145%. This sudden retreat came after Treasury Secretary Scott Bessent acknowledged the previous tariffs were unsustainable and following IMF warnings about a “major negative shock” to the global economy.
Toying with Federal Reserve independence
Trump publicly lambasted Fed Chair Jerome Powell as a “major loser” and criticised the Fed for not cutting interest rates fast enough, even threatening to remove Powell before his term ends in May 2026.
These attacks contributed to significant market instability – the S&P 500 has declined 16% from its February peak, while the US dollar reached a three-year low. Investors grew increasingly concerned that Trump undermining Fed independence could trigger higher inflation, increased bond yields, and further market turmoil.
Then came the retreat. After the markets reacted negatively, Trump declared that he had “no intention” of firing Powell (notwithstanding the fact that he wouldn’t have the legal authority to do so anyway).
The bottom line for investors
Trump’s erratic decisions contributed to the worst April for equity markets since the 1929 Wall Street Crash. Recession probabilities have increased significantly, with the IMF raising the odds of a US recession to nearly 40% and lowering its 2025 global growth forecast to 2.8%. The traditional safe-haven status of the US dollar and Treasury securities has come under question, significantly changing the investment landscape.
Given all the unknowns, April’s lesson for investors is not to react to every presidential announcement or tweet, as initial decisions will likely be reversed or significantly modified. As long as investors are in well-diversified funds – both globally and across asset classes – they should stay the course until the lasting impact of Trump’s decisions becomes clear.
Disclaimer – *The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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