Bitcoin Surges as Stocks Plunge $3.5T in Trump's Tariff War and Fed’s Inflation Warning

On April 4, as stock markets declined for the consecutive day, U.S. Federal Reserve Chairman Jerome Powell said The Trump administration’s “reciprocal tariffs” might considerably impact the economy, possibly resulting in "increased inflation and reduced growth."

At a conference on April 4, Powell adopted a careful stance and warned that tariffs might cause inflation to surge "in the upcoming quarters," which would complicate the Federal Reserve’s aim of achieving a 2% inflation rate. This comes only months after indications suggested potential interest rate reductions were expected for a smooth economic transition. As Powell stated,

Although tariffs are very likely to cause a short-term increase in inflation, it is also plausible that these effects might last for a longer period.

Just moments before Powell gave his speech, US President Donald Trump was present. called posted on Truth Social urging the Fed chair to "LOWER INTEREST RATES," criticizing Powell for always being "too slow."

At present, the Federal Reserve has a crucial decision to make: whether to halt further decreases in interest rates for the remainder of the year or to swiftly implement additional cuts should the economy exhibit indications of deterioration. Despite the acknowledgment from Fed officials that the current economic situation is favorable, Powell indicated that this might not remain the case.

It's too early to determine the suitable course for monetary policy.

On April 4, the unemployment rate climbed to 4.2% in March from 4.1% in February; however, conversely, non-farm payrolls for March surged by an impressive 228,000 jobs, surpassing projections and bolstering evidence of economic resilience. Additionally, the Consumer Price Index (CPI) saw a rise of 2.8% year-over-year in March, with more recent figures scheduled for release on April 10.

These numbers underscore a robust job market yet persistent worries over inflation, which echoes Powell’s caution regarding possible effects of tariffs.

Related: Bitcoin supporters rally at $80K resistance as 'World War 3 of trade wars' decimates US stock market

Powell’s warning about increasing inflation and decelerating economic growth occurred on the same day that the Dow plummeted by 2,200 points and experienced a 10% decline over two days in the S&P 500. This information comes from X-based market resource 'Watcher Guru'. announced that,

Today, the U.S. stock market saw a loss of $3.25 trillion, whereas the cryptocurrency market gained an additional $5.4 billion.

Bitcoin may experience additional fluctuations.

Many investors expect that in the near future, Bitcoin will (BTC) might witness an increase in price fluctuations. Powell’s comments regarding tariffs causing "increased inflation" and potentially "greater unemployment" could unsettle conventional market participants, leading them to shift towards Bitcoin as a safer haven.

Actually, experts have noted that the BTC price seems to be "diverging" from the recent decline in stock markets. Despite Bitcoin reaching a 9-day peak on April 2 prior to President Trump unveiling his "reciprocal tariffs" on what was termed "Liberation Day," the price dropped significantly after these tariffs were announced during a White House briefing.

Following that, Bitcoin has consistently remained above the $82,000 mark. When US equity markets plummeted on April 4th, BTC surged to $84,720, showcasing price behavior that deviates from typical patterns.

The independent market analyst Cory Bates shared the aforementioned chart. said ,

Bitcoin is becoming independent right before our eyes.

As China responds with 34% tariffs on U.S. products and President Trump urges Powell to reduce interest rates, increased market instability might drive up Bitcoin's value as a safeguard against economic unpredictability.

In 2018, during the U.S.-China trade conflict, the price of Bitcoin did not witness an overall gain throughout the year. Nevertheless, it showed significant fluctuation and saw a surge of around 15% as tensions heightened in mid-2018. This was triggered by the imposition of tariffs on Chinese products by the U.S. in July, which led to subsequent counteractions from China.

Connected: Bitcoin sentiment has dropped to its lowest point in 2023; however, a 'risk on' climate might arise to ignite aBTC price surge.

The content of this article neither offers nor suggests financial investments or strategies. Any form of monetary investment carries risks, thus viewers should perform independent investigations before reaching decisions.

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Schwab's New Dividend ETF Tilts Toward Energy: What Risks Lie Ahead?

As market volatility continues to rise, one of the largest dividend exchange-traded funds has significantly increased its investment in the energy sector. This particular fund manages around $70 billion in assets and holds the title of being the second-biggest ETF of this kind. According to FactSet, in recent weeks, approximately $2 billion was added to the fund from new investments made by various investors.

On March 21, the fund significantly increased its holdings in energy stocks, boosting them to 21% from 12%, as per their routine "reconstitution." Its top position remains ConocoPhillips, accounting for 4.7% of the total. This adjustment aimed to align the portfolio more closely with the intended investment goals.

Energy stocks have declined by 7.4% so far this year following the sell-off, outperforming the S&P 500 which has dropped by 13.5%. However, these stocks are highly sensitive to fluctuations in commodity prices, making them quite volatile. According to a report from State Street Global Advisors, the energy sector exhibits the greatest five-year volatility among all sectors. Additionally, oil prices are currently falling, OPEC might increase output, and new steel tariffs could further elevate expenses for companies within the industry.

CFRA analyst Aniket Ullal states that this strategy isn’t fundamentally flawed, yet cautious investors may prefer funds like the Vanguard Dividend Appreciation ETF or the iShares Core Dividend Growth ETF. These alternatives concentrate on firms that consistently increase their dividends instead of merely offering high yields; they each maintain an energy sector weighting below 6%. In comparison, the Schwab ETF boasts a dividend yield of 3.8%, whereas the Vanguard Dividend has one of 1.8%, and the iShares Core Dividend stands at 2.3%. "While these options provide greater returns," he cautions, "they also come with increased risks."

Write to Ian Salisbury at ian.salisbury@barrons.com

Last Week

Markets

Worldwide stock markets declined as anticipation mounted for President Donald Trump’s "Liberation Day" tariffs. Meanwhile, gold prices climbed and Treasury yields dropped slightly. Within the U.S., the S&P 500 index shed 4.6% over the quarter, while the Nasdaq 100 tumbled 8.3%, with NVIDIA dropping 19% and Tesla plummeting 36%. When details emerged about new tariffs—a general rate of 10% across all imported goods, higher rates specifically targeting China, Vietnam, Japan, and the EU, yet exempting Russia, particularly concerning semiconductor products—the S&P further dipped an additional 4.8%. This led to retaliatory measures from countries like China, which imposed a 34% tax hike on American exports, along with ongoing trade discussions. Despite robust employment figures showing steady job gains in March, the value of the US dollar weakened during this period. Over the course of the week, significant declines were observed: the Dow Jones Industrial Average sank by 7.9%; the S&P 500 Index decreased by 9.1%; and the NASDAQ Composite slid by 10%.

Companies

Following the ousting of a key FDA official, shares in biotechnology and vaccines plummeted; workforce reductions impacted Health and Human Services. Companies heavily involved in Asia, such as Apple, faced significant declines due to new U.S. tariffs. The White House halted financial support to institutions like Harvard, Princeton, and Brown. In investment news, SoftBank committed to leading an $8 billion funding round for OpenAI, valuing the company at $300 billion. Additionally, first-quarter Tesla delivery figures dropped by 13% compared to last year’s numbers.

Deals

Elon Musk’s AI firm, xAI, acquired X, formerly known as Twitter, for $33 billion. Right-wing network Newsmax made its debut at $10 per share and witnessed its stock surge more than 700%, only to later drop significantly. Rocket Companies announced plans to acquire mortgage servicer Mr. Cooper Group for $9.4 billion. Under pressure from China, CK Hutchison refrained from signing off on the sale of ports to an entity led by BlackRock. The White House postponed making a call on TikTok.

Next Week

Wednesday 4/9

The higher tariff rates On specific nations highlighted by the White House on April 2, new tariffs will be implemented. A base tariff rate of 10% applies to imports from all these countries starting April 5. These increased rates encompass a 34% duty on products coming from China, 24% from Japan, and 20% from the EU. In response, China declared 34% tariffs on every American product set to take effect on April 10, narrowing down the timeframe for potential talks significantly.

The Federal Open Market The committee has released the minutes from its mid-March monetary policy gathering. During this session, the central bank decided to keep the federal funds rate steady at 4.25%–4.5%.

Thursday 4/10

The Bureau of Labor The statistics agency will release the consumer price index for March. Experts predict a yearly rise of 2.6%, which is down by two-tenths from February’s figure. When excluding fluctuating food and energy costs—the so-called core CPI—it is anticipated to climb by 3%, as opposed to the previous 3.1%.

Friday 4/11

The unofficial start The start of the first-quarter earnings season begins with major banks and brokerage firms announcing their reports. BlackRock, JPMorgan Chase, Morgan Stanley, and Wells Fargo all publish their results prior to the market opening.

The Numbers

230

The number of new U.S. exchange-traded fund (ETF) products launched in the initial three months set a record since 2015.

37%

Revenue decrease experienced by the major Chinese real estate company Country Garden in 2024. The losses decreased to $6.1 billion.

7.4

By what factor does Nvidia’s mean revenue per staff member ($3.62 million) exceed that of Intel’s ($490,000)?

11 M

The number of U.S. homes keeping chickens in their backyards has risen to 5.8 million since 2018.

Write to Robert Teitelman at bob.teitelman@dowjones.com

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Wall Street Rebounds as U.S. Inflation Slows More Than Expected in February

The stock markets on Wall Street have recovered following the release of February's inflation data in the U.S., which showed a slower increase than anticipated.

Edward Boyd from Sky News Business reported that by February, the impact of tariffs will no longer be reflected in the inflation numbers.

"We're expecting a significant rise in inflation in America starting next month, specifically in March," he stated.

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Wall Street's Recession Odds Soar as Trump Stands Firm on Trade War

• Wall Street is increasing the likelihood that the U.S. economy might fall into a recession. , with some economists viewing the chances as equally likely. This comes as President Donald Trump continues to show no indication of retreating from his robust tariff policies, which include retaliatory charges scheduled to be implemented in a matter of weeks.

There is an increasing probability that the U.S. economy might fall into a recession according to analysts on Wall Street, with several economic experts considering the chances to be as high as 50-50.

The JPMorgan chief economist, Bruce Kasman, informed journalists in Singapore on Wednesday that he currently envisions roughly 40% recession risk , increasing from around 30% at the beginning of the year.

However, he noted that the chances of a recession could increase to 50% or higher if the proposed retaliatory tariffs by President Donald Trump, scheduled to be implemented on April 2, were actually enforced significantly.

"If we keep moving along this path toward even more disruptive, business-hostile policies, I believe the risk of heading into a recession would increase significantly," Kasman stated.

In the meantime, ex-Treasury Secretary Larry Summers cautioned that there’s roughly a 50% probability of an economic downturn. He attributed this risk to several factors: Trump's tariffs, stricter immigration policies, and widespread federal employee dismissals—all contributing to significant decreases in both consumers’ and businesses' expenditure intentions.

As economic predictions get adjusted towards a particular trend, they often gain inertia, he notes. said to Bloomberg TV on Tuesday And all the changes being made are leading to slower expansion.

Summers chimed in, saying, "We have a significant ambiguity issue here. It will likely be challenging to resolve this. Our growth projections are definitely going to miss the mark, pointing towards a deceleration. Additionally, there’s roughly a 50-50 chance we’ll see a downturn."

Mark Zandi, the lead economist for Moody's Analytics, has increased his probability estimate of an economic downturn to 35%, up from the initial 15%, largely due to tariff concerns.

However, if Trump proceeds with his tariff plans and maintains them for longer than just a few months, this could lead to an economic downturn, pushing the country into a recession. told Bloomberg TV on Wednesday.

At present, he remains hopeful that the discussions will result in reducing the tariffs, a prospect that keeps his prediction under 50%.

“But I can’t say that with much assurance as time goes on,” Zandi stated. “Moreover, the ambiguity surrounding these issues is causing harm.”

In fact, studies of customers and companies demonstrate growing pessimism regarding the economy due to uncertainties surrounding tariffs and widespread federal employment reductions. Even business leaders are becoming more apprehensive. deep-red states Those who supported Trump mention observing a deterioration in business circumstances.

Elsewhere on Wall Street, the likelihood of a recession isn’t as significant, yet it’s increasing notably. According to market experts Ed Yardeni and Eric Wallerstein, this trend is clear. earlier this month They view the chances of a bear market and a recession triggered by tariffs as 35%, an increase from 20% previously.

And Allianz Chief Economic Advisor Mohamed El-Erian raised his recession probability estimate to 25%-30%, up from 10% at the start of the year.

The Treasury Secretary, Scott Bessent, was questioned about NBC's Meet the Press on Sunday If he could ensure there wouldn’t be a recession, he responded that nothing can be guaranteed, noting that his previous statement about economic adjustments does not necessarily imply a downturn will occur.

"I assure you that continuing down this path would have led us into a financial crisis,” he stated. “Having researched and taught about it, I know that maintaining those expenditure levels would have made everything financially untenable. Therefore, we are readjusting our approach to ensure sustainability.”

In turn, Trump over the past weekend declined to exclude the possibility of a recession , leading to a plunge in stock prices. Then, just days later, he stated that he doesn't anticipate such an event. However, Trump remains steadfast on his trade strategies, stating on Thursday that "I'm not going to yield whatsoever."

And when questioned regarding the sharp dive in approval In a recent CNN survey about how Americans perceive Trump’s management of the economy, the White House supported his economic strategies and highlighted his achievements from his initial term.

Following President Trump's election, business executives have reacted to his America First economic strategy involving tariffs, deregulation, and the expansion of American energy initiatives by pledging over a trillion dollars in investments aimed at generating tens of thousands of new employment opportunities," stated spokesperson Kush Desai. "During his initial term, President Trump facilitated unprecedented increases in jobs, wages, and capital expenditure; he aims to achieve similar outcomes during his subsequent tenure.

The tale was initially showcased on

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China Unveils Plan to Supercharge Consumption as Economic Lifeline

• On Sunday, China unveiled a "Special Action Plan to Boost Consumption" aimed at supporting domestic spending within the globe's second-largest economy.
• The extensive rollout also detailed additional actions, including implementing "various strategies" to steady the equity markets and crafting more bond offerings tailored for retail investors.
• Currently, China is experiencing a slow consumer market, as evidenced by the sharpest decline in the latest CPI for February in more than a year, along with the PPI remaining in negative territory since September 2022.

China announced a " Special Strategy Initiative to Increase Consumer Spending on Sunday as an attempt to bolster domestic spending in the globe’s second biggest economic market.

The General Office of the Central Committee, an office directly under China's ruling party, said the plan was to vigorously boost consumption, expand domestic demand, and "enhance consumption capacity by increasing income and reducing burdens," according to a Google translation of the report.

The extensive rollout also detailed additional actions, including implementing "various strategies" to steady the equity market and crafting more bond offerings tailored for retail investors.

China's CSI 300 index and Hong Kong's Hang Seng index saw modest increases on Monday, showing gains of approximately 0.1%.

This follows one week after Chinese Premier Li Qiang presented his yearly address on governmental activities, where he highlighted the increase in consumer spending as the primary objective for the coming year.

Back then, Chinese officials have progressively recognized the importance of addressing this issue. to combat domestic deflationary pressures.

Currently, China is experiencing a slow-moving consumer market, as evidenced by the sharpest decline in the latest consumer price index for February in more than twelve months, along with a continuing decrease in the producer price index since October 2022.

The proposal unveiled on Sunday included measures to boost both incoming international and local travel. It aimed at assisting icy and snowy areas to transform themselves into internationally renowned spots for wintertime activities. Additionally, unilateral visa exemptions would be increased, and regional entrance regulations would undergo improvements.

Although the strategy doesn’t appear to include “any major innovations,” presenting it as an actionable plan indicates that specific measures at regional levels will ensue, according to Lynn Song, ING’s lead economist for Greater China, who stated this observation.

She emphasized that the plan demonstrates China's dedication to tackling long-term structural problems like wage stagnation, the adverse impact on household wealth due to the real estate and stock market conditions, and inadequate social welfare systems.

The proposal aims to boost the earnings of people living in both cities and countryside areas, including farmers. This would be achieved through measures like providing job assistance programs and maintaining the current unemployment benefits policies.

Song highlighted that "these issues probably require strategies spanning multiple years instead of solutions that can be implemented within a few months. It’s reassuring that policymakers are approaching these topics with a clear-headed perspective, which ought to facilitate the long-term shift towards an economy more reliant on consumer spending."

I would prefer to go with the saying "Rome wasn't built in a day." What do you make of that?

As the saying goes, Rome wasn’t constructed overnight—and neither was BYD’s rise or China's leadership in electric vehicles. Many significant Chinese policies require considerable time to yield results, and this document lays down foundations for the future growth of the consumer sector,” Song commented.

In March, Shen Danyang, who leads both the drafting team for the Government Work Report and serves as the director of the State Council Research Office, stated that due to potential new disruptions to international trade, China needs to concentrate more on stimulating internal consumption. According to him, this shift was recommended by Chinese policy makers.

At their yearly parliamentary session in January, Chinese officials committed to issuing an extra 300 billion yuan (approximately $41.45 billion) in ultra-long special government bonds aimed at bolstering consumer subsidies.

Richard Harris, who leads Port Shelter Investment Management as CEO, spoke with 's "". Squawk Box Asia that Chinese authorities truly need to concentrate on resolving issues within their domestic economy.

"The authorities are committed to boosting the economy, steadfast in keeping it running, and despite potential problems on the export front, they remain resolute in reviving the domestic market. They have no choice but to do so," Harris stated.

— Anniek Bao contributed to this report.

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