Highlights

• U.S. equities slumped over 2% as President Trump escalated criticism of Fed Chair Powell, raising fears about central bank independence; Trump later clarified he does not intend to fire Powell but urged faster rate cuts.
• The ICE Dollar Index fell to a three-year low, while the yen surged to a seven-month high (139/USD) amid safe-haven flows and U.S.-Japan policy tensions.
• Gold soared to a record $3,500/oz (+50% YoY) as investors sought safety; Bitcoin rallied to $93,000 with spot ETF inflows surging, decoupling from equities.
• IMF slashed global growth forecasts to 2.8% for 2025 and cut U.S. growth to 1.8%, citing Trump’s tariffs and rising recession risks (U.S. recession probability up to 40%).
• U.S. imposed tariffs up to 3,521% on solar imports from Southeast Asia, targeting Chinese-owned factories; tariffs to be reviewed by the ITC in June.
• Container traffic at Los Angeles/Long Beach ports dropped 44% YoY as U.S.-China trade war intensified, with 145% U.S. tariffs and 125% Chinese retaliation.
• China warned South Korea against exporting rare earth products to U.S. defense firms, threatening sanctions, escalating supply chain risks.
• Stocks rebounded 3% intraday after Treasury Secretary Bessent suggested a US-China trade deal remains possible, despite no formal talks.
• Tesla Q1 net income plunged 71% (to $409M), missing estimates, but shares rose 5% after Musk pledged to refocus on Tesla and accelerate robotaxi plans.
• Capital One received final approval for its $35.3B Discover acquisition, creating the eighth-largest U.S. bank.
• Northrop Grumman stock dropped 15% (largest since 2008) after a $477M B-21 bomber loss and guidance cut.
• Paul Atkins sworn in as SEC Chair, signaling a pro-crypto stance and review of 72 crypto ETF applications.

Market Commentary

Markets remain on edge as a confluence of macro and policy shocks drive volatility across asset classes. The sharp selloff in U.S. equities and the dollar was triggered by President Trump’s renewed attacks on the Fed and calls for pre-emptive rate cuts, which raised fresh doubts about central bank independence. While Trump later walked back speculation about firing Powell, the episode has left investors wary of further political interference in monetary policy—a major risk for both equity and fixed income markets. Treasury yields rose as investors sought havens, but the dollar’s weakness was pronounced, with the yen and gold both surging.

The global growth outlook has darkened, with the IMF citing Trump’s tariffs as a “major negative shock.” The U.S., China, and Europe all saw significant growth downgrades, and the probability of a U.S. recession in 2025 has jumped to 40%. The trade war’s real-economy effects are visible: U.S. ports are seeing a dramatic 44% drop in container traffic, and new tariffs on solar imports threaten to further disrupt supply chains and raise costs for manufacturers and consumers. China’s move to restrict rare earth exports to U.S. defense firms via South Korea adds another layer of supply chain risk, particularly for tech and industrials.

In this risk-off environment, safe-haven assets are outperforming. Gold’s record run to $3,500/oz and Bitcoin’s surge to $93,000 reflect both inflation hedging and a search for alternatives as traditional markets wobble. Crypto may see further tailwinds with the appointment of Paul Atkins as SEC Chair, who is expected to take a more favorable stance toward digital asset ETFs. Meanwhile, the rebound in stocks on hints of a possible US-China trade deal shows that markets remain hypersensitive to any signals of de-escalation, but with no talks underway, optimism may prove fleeting.

Sector-wise, industrials and exporters face mounting headwinds from tariffs and supply disruptions, as evidenced by Northrop Grumman’s steep drop and the challenges at the ports. Financials saw a bright spot with Capital One’s Discover deal approval, but the broader macro backdrop is likely to weigh on credit and lending. Tech and growth names like Tesla remain volatile, with company-specific news (Musk’s renewed focus) providing temporary relief amid broader selling.

Traders should brace for continued volatility, monitor developments around Fed policy independence, and watch for any concrete progress—or setbacks—on the US-China trade front. Safe-haven flows into gold, yen, and crypto are likely to persist as long as policy uncertainty and trade tensions remain unresolved. Stay nimble and watch for headline risk, especially around central bank commentary, trade negotiations, and further moves in safe-haven assets.