Hedgie's Market Edge - April 13, 2025

🦔 Hey everyone, it’s your favorite hedgehog here! Welcome to this week's market breakdown. I'm going to walk you through everything that happened in the markets this week and explain what it means for regular investors like you. This was an exceptionally volatile week with several major forces converging at once, so let's break it all down in simple terms.

Despite the wild ride last week, all three major indices actually ended with gains for the week, with the S&P 500 up 5.70%, the Dow up 4.95%, and the Nasdaq up an impressive 7.29%. As of Sunday evening when this newsletter was prepared, stock futures were pointing to a positive open on Monday (S&P 500 futures +0.6%, Nasdaq-100 futures +1.1%, Dow futures +0.3%) as traders continued to digest the latest tariff developments.

Note: This newsletter was prepared on Sunday evening for Monday morning release. Market conditions may have changed by the time you're reading this.

THE PERFECT FINANCIAL STORM: WHAT HAPPENED THIS WEEK

This week we experienced what I'd call a perfect financial storm where several major forces hit markets simultaneously:

Tariffs and Policy Uncertainty

When President Trump announced steep tariffs on April 2nd (his "Liberation Day"), it created significant market turbulence. The S&P 500 has dropped 5.4% since the announcement, with day-to-day volatility reminiscent of much more severe market crises.

The situation became even more confusing this weekend. On Friday, US Customs announced that phones, computers, and other electronics would be exempt from the 125% China tariffs. Then within 48 hours, Trump stated there was no "exception" but rather these products are still subject to the existing 20% tariffs and are "moving to a different tariff bucket." Commerce Secretary Howard Lutnick further clarified on Sunday that these exemptions are not permanent, saying these products will face "a special focus-type of tariff" on semiconductors and electronics in the next month or two.

This kind of policy whiplash makes it incredibly difficult for businesses to plan and for investors to assess risks. The "Magnificent Seven" tech stocks have been particularly affected, with the CNBC Magnificent 7 Index down about 5% since the tariff announcement. Apple has been among the hardest hit, losing nearly $640 billion in market cap in just three trading days following the initial announcement.

Treasury Yields Spike

The 10-year Treasury yield jumped from 3.99% to over 4.5% in just a week. This is an unusually rapid move for what's supposed to be a relatively stable market.

Why did this happen? Bond investors hate inflation, and tariffs are essentially taxes on imported goods that make things more expensive. When inflation concerns rise, investors demand higher yields to compensate for the eroding value of their future interest payments.

Dollar Weakness

The ICE U.S. Dollar Index hit its lowest level in three years this week. The greenback has seen particularly sharp drops against safe-haven currencies like the Japanese yen and Swiss franc, as well as the euro.

This is unusual because the dollar typically strengthens during periods of market uncertainty. Its weakness signals that global investors may be reassessing the attractiveness of U.S. assets.