Trade wars continue to fuel sell-offs in U.S. equities, pushing the S&P 500 down further. The optimism heading into 2025 is giving way to market uncertainty as the post-election rally in November 2024 has lost its momentum.
“The bull market is dead, and it was destroyed by ideologues and self-inflicted wounds,” said Emily Bowersock Hill, CEO and founding partner at Bowersock Capital Partners. “While the market may be close to the bottom in the short-term, we are concerned about the impact of a global trade-war on long-term economic growth.”
As mentioned, much of the market uncertainty is centering on tariffs while inflation is still a lingering concern. As reported by CNBC, China is responding to tariffs by the U.S. as well as initiating an antitrust investigation into American chemical company DuPont.
In the meantime, volatility is rising, as seen in the Cboe Volatility Index that’s up more than 150% through the first trading week of April. This, in turn, is fueling a flight to safe haven assets like gold and bonds as the 24-hour news cycle continues to put tariffs on center stage.
“The fear now as we go into the weekend [is] the trade war escalates, and the US doesn’t back down,” said Jay Woods, chief global strategist at Freedom Capital Markets.
2 Funds With Different Stories
While the S&P 500 has been wallowing in the red for much of the year, China equities have actually been on an uptrend as seen in the Direxion Daily FTSE China Bull 3X Shares (YINN ). The fund has been climbing higher for much of the year until the latest tariff news upended its rally. Still, the fund is up almost 50%, building upon the Chinese government’s efforts to stimulate its economy. If China equities manage to slough off any effects from tariffs, this could present a buying opportunity for traders to profit in the interim.
“Investor interest in Chinese equities is increasing, with indices such as the Hang Seng China Enterprises Index and CSI 300 rallying significantly since the start of the year,” an Invesco report noted.
While the S&P 500 is languishing, traders can capitalize on the downside with the Direxion Daily S&P 500 Bear 3X ETF (SPXS ). As seen so far in the first week of April, both YINN and SPXS are going in opposite directions. This gives traders the flexibility to mine for profitable opportunities regardless of whether the broad market is rallying or selling off.
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