Wall Street on edge: Tariffs, Fed drama, and a flight to safety

2 minutes read

21 April 2025

Wall Street on edge: Tariffs, Fed drama, and a flight to safety

Market swings as tariffs and Fed uncertainty dominate

Wall Street kicked off the week under duress as investors grappled with a new cycle of tariff threats and escalating friction between the Federal Reserve and the White House. President Trump's latest call for tariffs and public rebuke of Fed Chair Jerome Powell has unnerved confidence, causing stock futures to plummet and fueling fear of more to come.

Portfolio manager Bert Plik at Dakota Wealth captured the sentiment: “There’s considerable anxiety surrounding the uncertainty this situation creates, particularly concerning potential earnings reductions and the Federal Reserve’s commitment to remain on hold until further clarity emerges. If the Fed isn’t intervening, who else will step in?”

The Dow, S&P 500, and Nasdaq all registered losses last week. The S&P 500 fell more than 1%, while the Dow and Nasdaq each declined by more than 2%. Market observers say the worst of the tariff-induced sell-off is potentially behind us, but the future looks bumpy. Marko Papic, chief strategist at BCA Research, said, “I actually think President Trump will be successful in pursuing trade deals in 90 days... but they’re going to be marginal victories for America."

Investors turn to havens as volatility surges

The uncertainty has driven investors to safe havens. The dollar dropped to a three-year low, while gold rose to record levels above $3,400 an ounce. Oil prices also declined, mirroring concerns over global demand as trade tensions persist. A graph showing the inverse relationship between the Dollar Index (blue line) and Gold Price (yellow line) from January to April, highlighting the recent decline in the dollar and rise in gold prices.

Recent meetings have included wild fluctuations. Following a two-day sell-off that erased trillions from the market, an unexpected 90-day delay on some tariffs unleashed a record-breaking rally, as the S&P 500 leapt more than 9% in one day—its third-largest advance since World War II. Trading volume reached an 18-year peak as investors moved to reposition.

Jay Woods, Freedom Capital Markets' global chief strategist, summarized the hesitant optimism: "We know the worst-case with tariffs and that they’re being negotiated. Now we have to see where we go from here and what kind of longer-term impact it will have on stocks that drive this market."

Big tech earnings and market direction in focus

With more than 100 S&P 500 firms reporting earnings this week—among them tech giants Alphabet and Tesla—investors are preparing for more fireworks. Guidance is the issue: how are tariffs, international demand, and policy uncertainty impacting profits?

Fundstrat Global Advisors' Tom Lee thinks that headlines, rather than fundamentals, are moving the market: "The idea of a structural low remains intact—headlines are moving the market in this post-‘liberation day’ context.” ******Caution is recommended by analysts. Wells Fargo's Christopher Harvey warns of a "Fed put" coming into effect should the S&P 500 fall below 5,000, but others recommend holding onto low-volatility stocks to ride out the turbulence.

Wall Street holds its breath for now, following each news headline and earnings release for signals. As Papic succinctly says, the next few weeks can present "prime opportunities" for investors—should they be able to bear the volatility.

Markets are set to remain volatile as trade negotiations, Federal Reserve policy, and profits influence the next stage for US shares.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.