4/7/2025

Good Morning.

The Trump administration remains committed to its tariff agenda and has shown no sign of capitulating to plunging markets.

• Commerce Secretary: “The tariffs are coming”

• Treasury Secretary “I see no reason that we have to price in a recession,”

• President Trump: “HANG TOUGH, it won’t be easy, but the end result will be historic.”

The U.S 10-year Treasury yield has plummeted in response to a rush to the safe haven asset. The ten-year yield is now 4%, shedding 16 basis points since President Trump announced the new round of tariffs. 

The S&P 500 lost $5.4 T in two trading sessions alone.

China announced 34% reciprocal tariffs on all U.S. exports, starting April 10th. 

The Yen has surged, being seen as a safe-haven currency. 

 (JPY USD - April 2 to April, Bloomberg)

In today’s newsletter we will cover: 

• Markets

  • Markets Plunge

  • Bear Markets Bloom in Spring

  • Powell Flags Inflation Risks Amid Tariff Turmoil

  • Flight to Safety Pushes Treasury Yields Lower

  • Oil Tumbles to Three-Year Low

  • Dollar Drops Amid Rising Trade Tensions

  • Strong Jobs 

• Bank Stocks Suffer 

• Goldman Sachs is opening up Private equity to the high-net-worth

• Tariff Shock, Sticky Inflation, and Slowing Growth: Why Rate Cuts Are Only Delayed, Not Denied

• What to look out for this week!

Markets 

• Markets Plunge: U.S. stock indexes suffered their sharpest weekly losses since March 2020, driven by renewed trade tensions. The United States introduced new tariffs, prompting retaliatory measures from major trading partners and sparking widespread sell-offs late in the week. The S&P 500 dropped over 9% and now sits 17% below its all-time high from just six weeks ago. The NASDAQ and Dow followed suit, falling approximately 10% and 8%, respectively. 

• Bear Markets Bloom in Spring: The turn of the season brought a chill to equities, as both the NASDAQ and small-cap stocks slipped into bear market territory. The Russell 2000 dropped more than 20% from its November 2024 peak, officially signaling a bear market on Thursday. The NASDAQ followed on Friday, falling 20% from its record high set in December. 

• Powell Flags Inflation Risks Amid Tariff Turmoil: Federal Reserve Chair Jerome Powell warned Friday that newly imposed tariffs could drive inflation higher than previously anticipated. While he noted the U.S. economy remains “in a good place,” Powell acknowledged in a speech that both the scale of the tariffs and their economic fallout appear “significantly larger than expected.”

• Flight to Safety Pushes Treasury Yields Lower: U.S. government bond prices surged this week, marking their strongest gains in over seven months, as investors fled volatile equity markets in search of stability. The yield on the 10-year Treasury briefly dipped below 4.00% on Friday — a level not seen in roughly six months — down sharply from 4.80% in mid-January.

• Oil Tumbles to Three-Year Low: U.S. crude prices slid to their lowest level since April 2021 on Friday, closing the week near $62 per barrel. The more than 10% weekly drop marked oil’s steepest decline since 2023, with the bulk of the sell-off unfolding over the final two trading sessions. Just three months ago, crude was hovering around $80.

• Dollar Drops Amid Rising Trade Tensions: The U.S. dollar weakened this week as escalating trade tensions weighed on investor sentiment. A key index measuring the dollar against major global currencies slid as much as 2.5% on Thursday before partially rebounding. For the week, the dollar closed down around 1.0%, extending its year-to-date decline to 5.0%.

• Strong Jobs: Despite market turbulence, the U.S. labor market showed surprising strength in March, adding 228,000 jobs — well above economist forecasts. The figure nearly doubled February’s revised gain of 117,000 and topped the 12-month average of 158,000, underscoring continued resilience in the face of broader economic uncertainty.

Bank Stocks Suffer

• As fears of a trade war rapidly grow, bank stocks are being particularly affected by the market selloff. Banks might not manufacture or buy goods, but their business models will still be affected. A slowdown in economic growth would cause borrowing to decrease, and could lead to an increase in delinquencies.

• The KBW Bank Index has declined 13% since April 2nd. This has erased all gains experienced since the election.

(KBW Bank Index 1 Month, Boomberg)

• A poor economy would put pressure on long-term rates while short-term rates stay high, known as an inverted yield curve. This scenario can compress banks' net interest margin, decreasing their profitability when lending.

• M&A and other deal flow is now expected to decrease. These fees are a key part of investment banks' business. 

• Increased loan delinquencies would likely follow in a recession. This would increase the percentage of borrowers, both corporations and individuals, who are unable to make their payments on time. This would affect consumers and corporations.

Goldman Sachs is opening up Private equity to the high-net-worth

• ​Goldman Sachs is launching a private equity fund to enable affluent individuals access to a diverse array of private equity deals, including buyouts, growth investments, secondary transactions, and co-investments. 

• The fund is called G-PE and is open to clients with a minimum of $5 M in their portfolio 

• Institutional demand for PE seems to have stagnated, with portfolio allocation reaching its peaks. However, wealthy individuals with little exposure to private markets are seen as an opportunity

• Goldman Sachs has targeted private markets as an area of significant growth. Raising AUM targets numerous times. 

• For high-net-worth investors, this development presents an opportunity to diversify portfolios by including private equity assets, which have the potential for higher returns compared to traditional investments. 

• For managers like Goldman Sachs, they can grow their AUM and benefit from higher management fees and other lucrative terms that are available in private markets. 

• Goldman Sachs Asset Management already manages $83 B invested in Private equity, a number that is likely to grow significantly.

Tariff Shock, Sticky Inflation, and Slowing Growth: Why Rate Cuts Are Only Delayed, Not Denied

• Following Trump’s surprise tariff announcement, Wall Street now fully expects a rate cut by June. The CME FedWatch tool showed the odds jumping to 100% from 78.7% on Thursday, April 3rd, before easing to around 60% on Friday, April 4th.

• Odds of a May cut rose to 38.9% from 21.9%, while chances of 1.5 points in total cuts by year-end surged to 12.4% from 3%, signaling growing concerns about economic growth. This market pivot comes despite sticky inflation and strong jobs data, which contradict the Fed’s typical rationale for near-term cuts.

• The Atlanta Fed now projects a -2.8% drop in Q1 GDP, fueling fears of a slowdown.  While long-term inflation trends suggest disinflation, new tariffs could drive short-term price spikes.

• FED rate cuts are imminent.

Attachments: Tariff Shock, Sticky Inflation, and Slowing Growth: Why Rate Cuts Are Only Delayed, Not Denied (PDF)

What To Look Out For This Week!

Monday: Consumer credit for February

Wednesday: U.S. tariffs scheduled to take effect

Thursday: Chinese tariffs scheduled to take effect, CPI for March

Friday: Financial Earnings Kick off: JP Morgan Chase, Wells Fargo, BlackRock, Bank of New York Mellon

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Founders: Ben Banchik, Zachary Singer

Additional Contributors: Willam Le

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