(Bloomberg) — Wall Street’s gyrations shook markets anew on Friday, with stocks wiping out losses to extend their biggest rally since 2023 as a selloff in bonds waned.
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Volatility shows little signs of easing as concerns that President Donald Trump’s fast-evolving trade policy is not only shaking the globe but threatening the US status as the world’s safe haven. Equity convulsions have unsettled traders, with the S&P 500 up 1% after earlier falling about as much. Treasury 30-year yields dropped, while still remaining higher by 45 basis points since last Friday. The greenback hit a fresh six-month low.
Not since the Covid-19 pandemic has there been this little clarity on what the outlook for economies and earnings will look like, with financial markets descending into chaos, China unleashing retaliatory measures and the US president pausing some levies only hours after they took effect.
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Investors should sell any rallies in the S&P 500 until the US and China de-escalate the global trade war and the Federal Reserve steps in, according to Bank of America’s Michael Hartnett.
The strategist said tariffs and the resulting market turmoil were turning US exceptionalism into “US repudiation.” He recommends a short position on stocks — until the S&P 500 hits 4,800 points — and a long bet on two-year Treasuries. The guage traded around 5,340 Friday.
Higher bond yields, lower stocks and a weaker dollar are “driving global asset liquidation, will likely force policymakers to act,” Hartnett wrote in a note. But investors should “sell the rips in risk assets.”
“The US markets are not trading in the last couple weeks, like their traditional developed safe-haven status,” said Phillip Colmar at MRB Partners. “They’re trading more like a weak emerging-market country. We’re seeing the dollar really slide, and we’re seeing the bond market get threatened here.”
Friday brought a fresh signal that consumers were queasy even before Wednesday’s policy shift, with a plunge in sentiment as inflation expectations soared to multi-decades highs.
With tariffs at levels now set to halt most trade between the world’s biggest economies, the concern now is that the economic fight could spill into other areas. China retaliated against Trump’s latest tariffs by hiking duties on all US goods, while calling the administration’s actions a “joke” and saying it no longer considers them worth matching.
