- The stock market plummeted, with the S&P 500 and Nasdaq down 17% and 22% from January highs by April 4, following President Trump’s April 2 “Liberation Day” tariff announcement, which imposed higher-than-expected rates and heightened recession fears.
- Bill Gross, a Wall Street veteran with 50 years of experience managing $270 billion at PIMCO, warned against “catching a falling knife,” comparing the crisis to the 1971 gold standard collapse and highlighting risks akin to the Nifty 50 crash of 1972.
- Uncertainty persists as Fed Chair Powell anticipates a worse-than-expected tariff impact, potentially prompting rate cuts, while Gross doubts Trump will soften his stance soon, suggesting a prolonged economic and market challenge.
The stock market’s sharp descent, with the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) plunging 17% and 22% respectively from their January highs by early April 4, reflects the fallout from President Trump’s “Liberation Day” tariff announcement on April 2, which blindsided investors with steeper-than-expected rates. Bill Gross, a Wall Street veteran with over 50 years of experience, including his tenure managing $270 billion at PIMCO’s Total Return Fund, cautioned against chasing bargains in this turmoil, likening the current upheaval to the 1971 end of the gold standard but with swifter, harsher economic repercussions. His warning, sent via an email to Bloomberg, carries weight given his navigation of past crises – skyrocketing 1970s inflation, the Internet bust, and the Great Recession – yet he sees this as an “epic” event, urging investors to avoid catching a “falling knife” as stocks search for a bottom.
As I told Bloomberg, this is an epic economic and market event similar to 1971 and the end of the gold standard except with immediate negative consequences. Investors should not try to “catch a falling knife”. Today’s appealing “bargains” will be around tomorrow and the next day.…
— Bill Gross (@real_bill_gross) April 3, 2025
Trump’s tariff gambit has amplified fears of an economic slowdown already hinted at by recent data, with Fed Chair Powell conceding the impact may exceed prior estimates, potentially nudging the Federal Reserve toward rate cuts despite Trump’s public pressure on Powell—a tactic that has historically fallen flat. Gross, who co-founded PIMCO and oversaw $2 trillion in assets, views the market’s concentration in leading stocks as reminiscent of the Nifty 50 era, when overvalued “one decision” stocks crashed in 1972, suggesting a parallel risk today as valuations hinge on fragile expectations for future earnings. The possibility of a recession – a 60% chance by spring, according to JP Morgan – looms large, threatening corporate profits and stock prices, though some risk-tolerant investors might see the sell-off as a buying opportunity, a strategy that has paid off historically but often demands years to recoup losses—Cisco Systems (CSCO), still languishing well below its 1999 peak of $75, stands as a stark reminder.
Uncertainty clouds the path forward, with Gross skeptical of a quick resolution, noting Trump’s “macho” resolve makes tariff rollbacks unlikely in the near term, even as markets hope for negotiations to blunt the blow. The veteran bond manager’s blunt assessment underscores the gravity of the moment: this isn’t just another dip to buy but a structural shift with enduring consequences. Whether Powell’s potential rate adjustments or diplomatic breakthroughs can stabilize the economy remains unclear, but for now, the market’s 17% and 22% drops signal a profound reset, testing the resilience of investors and the broader financial system alike.
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