Global stock prices fell last week as investors feared a trade war, given that U.S. President Donald Trump announced new tariffs, which could negatively impact the growth of global economies.
On Wall Street, the Dow Jones dropped 2.5 percent to 43,428 points, while the S&P 500 slid 1.7 percent to 6,013 points, and the Nasdaq index fell 2.5 percent to 19,524 points. The indices fell the most on Friday, when a series of data indicating a slowdown in the growth of the U.S. economy and weakening consumer sentiment worried investors.
– Business optimism is waning due to heightened uncertainty – says Chris Williamson, an economist at S&P Global.
The day before, investors were concerned about Walmart’s business report. Although the results of the world’s largest retail chain were solid, Walmart reported that it expects sales growth in its fiscal year to be only between 3 and 4 percent. This is lower growth than analysts had estimated and suggests that a weakening in consumer demand can be expected.
– Since consumption makes up 70 percent of the U.S. economy, Walmart’s weak guidance has led to nervousness regarding consumer strength and their spending in the future. This has put pressure on Walmart’s stock, which then spread to the entire market – explains Robert Pavlik, an analyst at Dakota Wealth.
Threats of Tariffs
Walmart’s results also provided insight into how the company will fare due to the ever-growing list of products that U.S. President Donald Trump wants to impose tariffs on. On Wednesday, this list was expanded to include lumber, automobiles, semiconductors, and pharmaceuticals. The question arises whether other economic powers, including China and the European Union, will respond by increasing tariffs on imports of U.S. products, which could lead to a trade war.
– You can’t talk about uncertainty without mentioning tariffs, can you? The headlines about this are very different. Is Trump using tariff announcements as a negotiating tool? Is he serious about it? Who will it affect? – says Mike Dickson, an analyst at Horizon Investments.
Fed Will Not Rush to Cut Rates
Investors were also focused on the minutes from the last meeting of the U.S. central bank’s leaders, when they left interest rates unchanged due to elevated inflation. The minutes did not bring any surprises, showing that Fed leaders are concerned about rising inflation and the potential impact of Trump’s policies, particularly tariffs, on their efforts to bring inflation down to targeted levels. This means that the Fed is unlikely to continue cutting rates anytime soon.
