Financial insights for the week ending April 4, 2025
For the week ending April 4th, the S&P 500 fell by 9.08%, the NASDAQ was down 10.02%, and the Dow Jones Industrial Average fell by 7.86%.
Over the past week, global stock markets experienced significant turmoil following President Donald Trump’s announcement of sweeping new tariffs on April 2, 2025. Dubbed “Liberation Day,” the policy imposed a baseline 10% duty on all imports, with even higher rates targeting specific countries—fueling fears of a broader trade war and an impending recession. In response, U.S. equities suffered steep declines. China, whose markets were closed for a national holiday, quickly announced retaliatory tariffs, catching U.S. markets off guard while still open for trading. By the end of Thursday and Friday’s sessions, the Dow Jones Industrial Average had fallen over 3,900 points, and both the S&P 500 and Nasdaq Composite had dropped 11%, marking their worst weekly performances since the onset of the COVID-19 pandemic. The Nasdaq officially entered bear market territory, down more than 20% from its December 2024 high. Additionally, the U.S. IPO market stalled, with companies like Klarna and StubHub postponing their public offerings amid heightened volatility. While the imposition of tariffs was not unexpected, the severity of their scope surprised markets. Rather than simply matching tariffs imposed by trading partners on U.S. goods, the administration’s stated intent appears to be curbing imports altogether by increasing their cost—effectively forcing a rebalancing of the trade deficit. The trade imbalance refers to the gap between what the U.S. exports to and imports from other nations. Because the U.S. is a service-driven economy and imports a vast number of goods produced through cheaper overseas labor, narrowing the trade gap implies making imports expensive enough that domestically produced goods become comparably priced. The long-term effects of this policy remain uncertain, but the near-term consequences are likely to follow basic economic theory: reduced consumption, as households and businesses respond to higher prices. Compounding this issue is the fact that the base 10% tariff was applied even to nations that do not currently impose tariffs on U.S. goods, risking diplomatic and economic fallout beyond the intended targets. Additionally, just moments after the tariffs were implemented, the Senate began discussions on advancing the long-awaited tax-cut bill. Lawmakers are now considering using the anticipated tariff revenue—which flows directly to the U.S. government—as a means to offset the fiscal cost of the proposed cuts. With this new revenue stream in place, the tax bill now appears to have renewed momentum, with formal negotiations expected to unfold in the coming days and weeks.
Looking ahead, investor focus next week will be squarely on the implementation of the newly announced tariffs, any potential concessions or negotiations that could soften their impact, and ongoing progress on the tax cut bill. Most economic data releases are likely to be overshadowed until there is more clarity on these critical policy developments. The tariffs targeting China—along with China's expected reciprocal measures—are set to take effect this Thursday, creating a brief window of market speculation and potential optimism beforehand. Meanwhile, the European Union has yet to announce its formal response, leaving open the possibility for further escalation or diplomatic engagement. Notably, last week’s tariff rollout largely excluded Mexico and Canada, suggesting that the coming week will focus on the reactions from China and the EU. For smaller countries, near-term options appear limited, with many expected to comply with U.S. demands in the short run. However, there is growing concern that, over the long term, these nations may seek closer alignment with China as a strategic counterbalance to U.S. pressure.
For this week's financial planning tip of the week, let’s talk about tax-loss harvesting—a smart way to potentially lower your tax bill by using investment losses to cancel out gains elsewhere in your portfolio. This strategy only works in taxable investment accounts, not in retirement accounts like IRAs or 401(k)s. It’s a common myth that tax-loss harvesting means pulling your money out of the market, but that’s not true—you can sell an investment at a loss and then buy a different, but similar one (like replacing one financial ETF with another) to keep your portfolio’s overall strategy intact. This helps you stay invested while still taking advantage of the tax benefit. Be careful, though: if you buy back the same or a nearly identical investment within 30 days, you’ll run into the IRS’s wash-sale rule, which cancels out the tax break. Because of these details, it’s a good idea to talk with your financial advisor before making any changes—they can help you do it the right way and make sure it fits with your bigger financial plan.
Enjoy your day! Come back next Saturday for our latest commentary. We are here to answer any of your financial questions.