The stock market fell significantly after President Trump announced extensive tariffs on April 2. The so -called “Relief Day” announcement included higher than hope tariff rates, forcing investors to reset expectations for the US economy and corporate gains.
Given recent data, a potential slowdown in the US economy may already be underway, and the risk that tariffs could push us into a complete recession casts a long shadow over stocks, given that stock price valuation is largely determined by revenue expectations and future profit growth.
Historically, steep sales as we witness in the S&P 500 and NASDAQ Composite, which were down 17% and 22% early on April 4, respectively, from their highlights in January, create opportunities for investors who tolerate 'buying the dip.'
The potential that investors go to hunt bargains has captured the attention of former Wall Street Bond manager Bill Gross. Gross has been steering markets since 1971, and co-founded Pacific Investment Management Co., or Pimco, a huge company with $ 2 trillion controlled. He used to manage over $ 270 billion through the total Pimco return fund, winning him the nickname “Bond King” before moving to Janus Henderson Investors between 2014 and 2019.
Gross has seen a lot over his 50-year career, and offered a straightforward message about the stock market this week.
Legendary investor Bill Gross offered a free -to -do message to stock investors after tariffs caused the S&P 500 sales.Bloomberg & Sol; Getty Images
The Federal Fund has a dual mandate to target low inflation and unemployment, two goals often contradicts that can leave the Fed after the curve in terms of changing monetary policy.
For example, raising interest rates slows economic activity, breaks inflation. However, it also leads to layoffs, which we are currently testing.
After incorrectly predicted in 2021 that inflation would be temporary, eventually, Fed Chair Jerome Powell enacted the most restrictive and Hawkish interest rate hikes since the then fed chair, Paul Volcker, fought back inflation back in the early 1980s.
However, the deferral of the inflation battle contributed to an inflation of 8% in 2022. Although inflation has retreated since then, it is cumulative, so the damage associated with hesitation is still felt.
A weakened job market caused in part by higher rates that kept a lid on economic activity stimulated the Fed to cut rates in the fourth quarter. However, inflation crepted higher to 2.8% in February from 2.4% in September, leading the Fed to press a further cuts.
Unfortunately, delays have not helped revitalize job growth. According to the Office for Labor Statistics, the unemployment rate in February totaled 4.2%, up from 3.5% as recently as 2023.
And 275,000 Americans lost their jobs in March, according to Challenger, Gray, & Christmas, partly due to the Government's Department's efficiency job cuts (DOGE). The number of layoffs grew striking 205% year -on -year. It was the largest month for layoffs since Covid cried the economy in 2020.
What happens next to the economy is uncertain, but increasing unemployment and reciprocating inflation is not a great recipe. Furthermore, President Trump's Tussle tariff risks inflationary fire fuel, and given that consumers are already cash, can take a large toll on corporate profits and earnings growth.
Bill Gross's long -time experience, Wall Street, means he has seen many pops and market drops, including the Nifty 50, Skyrocketing Inflation in the 1970s, the S&L emergency in the late 80's and early 90s, the boom and the internet bust, the large recession, Covid, and the 2002 bear market.
In short, Gross has been around the block, making his markets this week particularly concerned.
“Investors should not try to 'catch a falling knife,” gross written Bluntly in e -mail to Bloomberg.
Buying the dip in the S&P 500 has been a historically winning strategy, but the pain remained while stocks are struggling to resist their bottom. And can take years to restore losses. The situation is worse for individual stocks, which will never return to their previous highlights (Cisco Point: Cisco Systems (Csco))) still trade below its 1999 peak).
“This is an economic event and an epic market similar to 1971 and the end of the gold standard except with immediate negative consequences,” said Gross.
In the early 70s, a collection of 50 leading stocks became considered “one decision” stocks – buy only. Money was centralized in them, establishing a significant market reduction when they peaked in 1972. Sounds familiar?
It's a bit unclear what will happen next. Chairman Fed Powell admitted that he believed the tariff effect will be worse than previously anticipated, perhaps establishing rate cuts again. Meanwhile, President Trump on the air waves is pressing Powell to cut rates – a strategy that has not worked in the past.
The recent market reduction may encourage negotiations that reduce tariffs, alleviating their impact. But that is still seen, and Gross is not convinced.
“Trump can't get back anytime soon,” said Gross. “He's too macho for that.”
