Inside One of the Wildest Weeks for Markets in Recent Memory

The financial markets experienced a remarkable surge last week, with the S&P 500 climbing an impressive 6%, marking its most significant weekly gain since November 2023. However, the headline growth barely scratches the surface of the chaos that unfolded within a volatile week defined by dramatic swings in the stock market, turmoil in the bond market, and a marked decline in the value of the dollar. A tempest has been brewing, triggered primarily by the Trump administration’s trade war, leading to a series of unpredictable market reactions that investors won’t soon forget.

Here’s a closer look at how the week unfolded, capturing the seismic shifts in the financial landscape. As the week concluded at 4:00 p.m. on Friday, key U.S. indexes stood as follows:

• S&P 500: 5,363.26, up 1.81%
• Dow Jones Industrial Average: 40,212.71, up 1.56% (+618.99 points)
• Nasdaq Composite: 16,724.46, up 2.06%

A Week of Unprecedented Volatility

Market analysts described the week as a chaotic rollercoaster, with investors grappling with the implications of the fluctuating tariff announcements from the Trump administration. Edward Moya, a senior market analyst at AlphaSense, captured the sentiment perfectly: “It is very difficult to provide any type of guidance, given the current macro backdrop, and it seems that we go from panic to euphoria to terror.”

Monday: The Week Begins with a Jolt

The week kicked off on a tense note, as the markets were still reeling from significant losses in the previous days, suffering their worst downturns since the onset of the pandemic. Influential voices in the financial community lamented the trade war, with hedge fund manager Bill Ackman warning of “economic nuclear war” should negotiations fail to resolve tensions. Initially, the S&P 500 briefly entered bear market territory but then bounced back 8.5% in less than an hour, driven by reports that the White House was mulling a temporary pause on tariffs. However, this was soon dismissed as “fake news,” showcasing how desperate investors were for any positive signs amid the turmoil. Ultimately, the S&P 500 finished the day down 0.23%.

Tuesday: Tensions Escalate

Tuesday’s trading opened on a high note but quickly turned downward as the market absorbed the implications of Trump escalating tariffs on China to a staggering 104%. Despite initial optimism surrounding a potential trade deal with Japan, the market struggled under the weight of these announcements. By the end of the day, the S&P 500 had plummeted 2.19%.

Wednesday: Bond Market Turmoil

The midweek session saw long-dated Treasury yields surge, contradicting the typical behavior when markets face uncertainty. The yield on the 10-year Treasury jumped as high as 4.5%, indicating traders were offloading U.S. debt. This unforeseen spike managed to capture Trump’s attention, prompting him to announce a 90-day pause on reciprocal tariffs while still raising China’s tariff rate. The market reacted swiftly, with the S&P 500 soaring by 7% and finishing the day up 10%—its best performance since 2008. The Nasdaq also saw its most significant single-day gain since 2001, while the Dow Jones surged close to 3,000 points.

Thursday: Reality Check

Following Wednesday’s dramatic rally, Thursday brought a sobering realization as the initial excitement wore off. Focus shifted back to the high tariffs on China and the uncertain state of trade negotiations. Bond market analysts noted that it seemed the bond market’s fluctuations had indeed instigated the administration’s decision to pause tariffs.

Conclusion: A Week to Remember

The whirlwind week in financial markets will undoubtedly be remembered as a pivotal moment, where an array of conflicting signals resulted in historic volatility across stocks, bonds, and currencies. As investors sift through the implications of the trade war and look towards future developments, it remains clear that the current economic landscape is fraught with uncertainty. This week serves as a stark reminder of how interconnected global markets are and how sudden shifts can lead to dramatic financial consequences.