Trump's announcement of a new round of tariffs triggered panic selling, and on April 3, Eastern time, the three major U.S. stock indexes plummeted, and the total market value of the "Big Seven" of U.S. stocks evaporated by 1,034.3 billion U.S. dollars (about 7.5 trillion yuan).

In the face of the epic plunge in U.S. stocks, U.S. President Donald Trump thought the response to his announced "reciprocal tariffs" was very good, and said that "U.S. stocks will prosper, and the United States will prosper."

At a time when Wall Street traders are increasingly expecting the Fed to cut interest rates multiple times this year, investors are now expecting more rate cuts, and possibly sooner.

Trump's "Prosperity Trifecta"

On April 3, Eastern time, Trump was very optimistic when he was interviewed by reporters at the White House. "I think it's going very well," he said. You've never seen anything like it. The market will prosper, the stock market will prosper, and the country will prosper. ” Trump also noted that the rest of the world is watching to see if there is a way to reach a similar deal, and highlighted recent large investment commitments made by some companies in the United States, claiming that the total investment pledged is close to $7 trillion.

However, in terms of action, Trump signed two executive orders on so-called "reciprocal tariffs" at the White House on April 2, announcing that the United States will set a "minimum base tariff" of 10% on trading partners and impose higher tariffs on certain countries with large trade deficits. According to the White House statement, the new tariff measures will take effect in phases on April 5 and April 9.

U.S. Secretary of Commerce Lutnick also expressed his views on this tough trade strategy. He noted that there is little chance that the Trump administration will reconsider these trade policies. "I don't think it's possible (Trump will give up his tariffs). It's a reordering of global trade," Rutnik explained that Trump's announced tariffs will prompt a "reshuffle" in global trade, which will force other countries to open their markets to more American goods.

Jingtai believes that investors need to be wary of the two key time points on April 5 and 9, pay attention to the sectors that are greatly affected by tariffs, and be prepared to deal with market volatility. Trump's "tariff combination" has played a tiger and made global trade his own golf course. Investors should fasten their seatbelts, after all, this master's "art of trading" has always been thrilling!

Epic plunge

Due to the new round of tariffs announced by Trump, the U.S. stock market experienced a big storm, and the three major U.S. stock indexes plummeted across the board, with the Nasdaq plummeting 5.97% as of the close, the largest decline since March 2020; The S&P 500 plunged 4.84% and the Dow plunged more than 1,600 points, or 3.98%, the biggest one-day drop since June 2020.

The tech giants have not escaped the storm either. The stock prices of Apple, Amazon, Meta and other companies have all fallen sharply, and even Intel has barely maintained a slight gain. Chinese concept stocks have not been able to stand alone, such as Futu Holdings, iQiyi and other companies have also fallen a lot.

The VIX, a market panic indicator, surged 40% in a single day, breaking above the 30 mark, suggesting that the market's nervousness is growing.

Investment expert Jordan Rizzuto believes that such a market reaction is not surprising given the current fragility of the stock market and the impact of the new tariff policy. Another legendary investor, Bill Gross, advised investors not to rush to buy for the time being, believing that it is now like an epic economic and market event.

The probability of the Fed "bailing out".

Traders on Wall Street now increasingly feel that the Fed will cut interest rates several times this year, the first of which could be in June, when a 25 basis point cut is expected. According to CME, the probability that the Fed will leave the current rate unchanged in May is 68.8%, while the probability of a 25 basis point rate cut is 31.2%. By June, the probability of staying unchanged had dropped to 18.5%, but the probability of a 25 basis point cut had risen to 58.7%, and there was even a 22.9% chance of a 50 basis point cut.

Goldman Sachs investment officials pointed out that the United States is currently experiencing a so-called "growth shock", which means that the Fed may enter interest rate cut mode sooner than previously expected. He believes that the performance of the bond market reflects the market's expectation of further easing by the Fed.

Allspring George Chief Investment Strategist at Global Investments Bory shared a similar view, saying: "The Fed does have enough 'ammunition' to support the market, and investors are now pricing in more rate cuts, and probably sooner." He added that it now looks almost certain that a rate cut in June will be a certainty, and that it will be possible in May.

However, Fed Vice Chairman Jefferson cautioned that while the U.S. economy is on solid footing, given that tariffs have pushed up goods inflation and there is a lot of uncertainty about the outlook, he prefers to keep the current moderately restrictive interest rate level for the time being, while closely monitoring changes in employment and prices.

Jingtai advises investors to pay attention to the current bond market, which has begun to price in advance the expectation of interest rate cuts, and growth stocks may usher in valuation repair opportunities. Focus on rate-sensitive sectors (e.g. real estate, technology). Markets are betting on a "dovish pivot" by the Fed. While officials are still saying "be patient", traders are already smelling a rate cut. What investors need to do now is to fasten their seatbelts and prepare for a possible policy inflection point!