PremiumGoldman Panics: This Is Much Worse Than Expected
In the odd case someone was lucky enough to pull a Bessent and not to look at US equity futures since the cash close, we have some very bad news: Trump's 'liberation day" ended up being just that, and as of this moment traders feel greatly liberated of much of their net worth.
But today's rugging by Trump was especially brutal because while risk assets did eventually crater, with S&P futures flirting with a 4% drop and the Nikkei nuked 6% lower, futures actually spiked higher at first on flashing red headlines that Trump would institute a 10% tariff floor. The "efficient" market, in its infinite shoot first ask questions never wisdom, interpreted this as the final shape of Trump's trade war and assumed this would be the extent of today's announcement... and boy was it wrong: the president was just getting warmed up, and the very next minute Trump unveiled an ungodly barrage of reciprocal tariffs against literally the entire world, including some cases of near triple-digit reciprocal tariffs which will lead to a historic emerging markets shock...
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... which in turn sparked a crash of S&P futures after hours...
... and unleashed a global flight to safety (gold, for example, is skyrocketing higher).
And lest readers think we are exaggerating, we have excerpted from the after-hours note by Goldman trader John Flood, aptly titled "Worse than Expected", in which he writes that the Goldman desk is "currently witnessing long selling of tech names and aggressive HF shorting in macro products. S&P 500 futures just reopened and are trading down ~3%."
As Flood reminds his clients, we had already seen consistent derisking from both asset managers and HFs into this event (over the last 2 weeks) but this afternoon’s announcement was worse than expected (we think when you throw everything into a blender you get closer to a US effective tariff rate of 20%...vs our 15% baseline assumption).
Summarizing it for the cheap seats, the Goldman trader was laconic: "Not good. This will hit GDP growth, push inflation higher, and keep pressure on the US stock market. Uncertainty has not been tamed. With what we know right now we are clearly looking at a very challenging day for the US stock market tomorrow (feels like a S&P 500 down 4% ish type of session)."
Flood then goes through this afternoon's debacle blow by blow:
The WSJ dropped this 4:10pm headline that got the market momentarily excited (S&P Futures touched 5755 @ 4:15pm ...at time of writing futures now trading @ 5515): *U.S. to Impose 10% Across-the-Board Tariff on All Imports, President Trump Says –WSJ
But excitement quickly faded as The President announced that there would be a 10% baseline tariff that goes that into effect on 4/5 at midnight & then significantly higher reciprocal rates that will go into effect on 4/9. Reuters posted this full list of the reciprocal tariffs.
Worse, China rariffs are Stacked, and will be 34% + 20% = 54%.
Canada and Mexico: the existing fentanyl/migration IEEPA orders remain in effect, and are unaffected by this order. This means USMCA compliant goods will continue to see a 0% tariff, non-USMCA compliant goods will see a 25% tariff, and non-USMCA compliant energy and potash will see a 10% tariff.
Here is the fact sheet released by the white house.
Finally, the generals are now dead and buried, as trade policy risk favors the S&P 493: as shown below, magnificent 7 stocks are more exposed to global growth risks than S&P 493.
Finally, here is the sensitivity of S&P 500 returns and index levels.
More in the full note available to pro subscribers.
