Wall Street's week of whiplash brought fear, relief and caution

Reuters

10-04-2025

Summary
Trump's flip-flop on tariffs stokes dramatic market volatility
Market turmoil reminder of scenes from pandemic trading
Analysts warn risks remain despite short-term relief for markets
NEW YORK, April 10 (Reuters) - Wall Street traders and investors have been sent to the brink over the past week by President Donald Trump's tariff policy, scrambling to figure out strategies and calming clients as trillions were wiped off stock market values.
A massive relief rally, however, comes with a caution sign.
here.
Since announcing sweeping tariffs on April 2, the S&P 500 has done a near round-trip of historic proportions. The benchmark index extended its slide from its February high to the brink of confirming a bear market, as investors priced in dire scenarios for the economy after Trump announced tariffs that would raise U.S. trade barriers to the highest levels in over a century.
The Cboe Volatility index (.VIX), opens new tab, Wall Street's "fear gauge," soared earlier this week to its highest closing level since the COVID-19 pandemic five years ago.
Then, in a stunning reversal on Wednesday, Trump said he would temporarily lower the hefty duties on dozens of countries while further ramping up pressure on China, prompting a massive relief rally, sending the S&P 500 up nearly 10%, its biggest one-day jump since October 2008.
The rapid policy changes translated into non-stop action, stress and drama on trading floors and investment houses.
"It's been a quite a wild ride," said Joe Tigay, portfolio manager for Rational Equity Armor Fund, who said it brought back memories of trading through massive swings during the pandemic. "Personally, honestly, this is what I live for."
The rapid pace of unfolding events in recent days prompted a deft juggling of priorities, including client calls, trading and making sense of markets, said Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, as the market drama surpassed the wild trading seen during the COVID-induced market crash of March 2020.
"This is more headline driven than what we saw in COVID," Murphy said. "There's just not enough time because you're going from one thing to the next."
Clients wanted frequent updates as market losses stacked up, advisers said.
"We reached out to as many clients as possible via a client letter and phone calls," said Gina Bolvin, president of Bolvin Wealth Management Group in Boston.
"Some of my nervous clients were comforted when they learned that as the market was declining I had been investing some of my own money."
But while some have embraced the volatility, others caution that the market remains fragile, U.S. policy remains unpredictable and that the U.S. is not out of the woods.
"It's definitely good news because it shows that the negotiations are in good enough shape that they think that they've accomplished what they needed to by this initial conversation," said Mark Hackett, chief market strategist, Nationwide Investment Management Group in Philadelphia.
"But I want to put a pretty big caveat out there because 8% rallies in 20 minutes in the Nasdaq aren't a heck of a lot healthier than 8% declines."
TRUMP PUT BACK ON?
After a week of concern that Trump was no longer worried about stock market losses, some investors speculated that markets had prompted Trump's decision, including a rout in the bond market that came to a head on Wednesday and led to a massive spike in Treasury yields.
Investors had previously relied on the theory of a Trump put, a reference to investor belief that Trump would reverse policy if markets ran into trouble.
"I think this is a reminder that Trump does not want a bear market in stocks, and he does not want a recession, so this is forcing a rethink of the approach," said Talley Leger, chief market strategist, The Wealth Consulting Group.
But many investors said persistent uncertainty around tariff policy could still have broad fallout, impeding the ability of companies to plan and influencing consumer behavior.
"They hit the pause button and the market rejoiced," said Alex Morris, chief investment officer at F/m Investments. "But of course, there is no promise that we'll manage to solve anything in 90 days."
Deutsche Bank said in a note that while the Trump put appears back on, the policy back-and-forth will cause lasting damage. "Even if the tariffs are permanently suspended, damage has been done to the economy via a permanent sense of unpredictability in policy."
Market volatility on Wednesday had been trained on the bond market, which saw a bruising selloff in U.S. Treasuries, with some market participants saying funds had been selling such liquid assets such as Treasuries to meet margin calls.
"There's definitely sensitivity to what happens in the Treasury market," said Matt Orton, chief market strategist at Raymond James Investment Management. "If something breaks in the Treasury market, that could be very, very bad."
Trump said on Wednesday the bond market had recovered well after investors became queasy about it in reaction to his tariffs.
"The bond market now is beautiful," he told reporters.
The White House said Trump's move to hike tariffs on China and pause tariffs on other countries came after receiving "good-faith commitments from a majority of our trading partners willing to strike favorable trade deals."
"The only interest guiding President Trump's decision making is the best interest of the American people," White House spokesman Kush Desai said. "The Trump administration remains committed to using every tool at our disposal to address the national emergency posed by chronic trade deficits – including both tariffs and negotiations.'
'STRESSFUL WEEK'
Some investors felt the relentless string of bad news for markets and wild gyrations were impossible to maintain.
"We had assumed that some form of capitulation would be forthcoming," said Christopher Hodge, chief economist for the US at Natixis in New York, citing the financial carnage and expectation of economic pain.
Since Trump unveiled his tariff plan on April 2, the stock market has undergone some record-breaking gyrations. It notched an 8.1% intra-day price swing in the benchmark S&P 500 index on Monday, while Tuesday's market saw one of the biggest reversals for the benchmark index in at least the last 50 years.
Wednesday's market about-face was even more stark, with the day's 10.7% range stacking up as the fifth largest in at least the last fifty years.
Bolvin said this had been "a stressful week."
"When my 3 year old woke up and asked if the market was down, I knew we were close to the bottom," Bolvin said.