The sharp and persistent decline in global equity markets—fueled by President Donald Trump’s aggressive tariff policy—is testing the resolve of investors and the stability of the financial system.
Since April 1, the S&P 500 has fallen more than 10%, sending shockwaves across asset classes and raising concerns among economists and strategists who are watching closely for early signs of a financial crisis.
Although traditional measures of market stress like high-yield credit spreads and interbank funding rates remain relatively stable, the sustained pressure on equities is rattling confidence. “It’s kind of a slow-moving shift in that direction [of a crisis],” said Jens Nordvig, founder of Exante Data. The longer tariffs remain in place, he warns, the more likely pressure will build on the banking sector—and potentially the broader economy.
The fear is less about an immediate crash and more about systemic cracks forming under the surface. Unusual movements in both equities and fixed income markets suggest that investors are struggling to process exponential uncertainty. Long-term U.S. bonds, typically a haven during stock selloffs, are also under pressure—another anomaly that has raised eyebrows among market watchers.
Bonds, the Dollar, and the Fragile Balance of Risk
In normal times, the U.S. dollar and Treasury bonds serve as anchors of safety during periods of market stress. But recent trading behavior has upended that convention. Following the tariff announcements, the U.S. Dollar Index dropped 1.6% before rebounding, signaling uncertainty about America’s economic leadership and its role as the world’s financial haven.
Nathan Sheets, Citi’s chief global economist, is tracking the shift. “In previous crises, the dollar—and U.S. assets—are always the safe haven,” he said. “But as we shift terms of engagement with the rest of the world, does that increase risk premiums?”
Unusual volatility in short-term interest rate contracts and rising bond yields point to investor uncertainty about the Federal Reserve’s next move. Some expect rate hikes to combat tariff-driven inflation. Others predict rate cuts to offset slowing growth. “It’s all on the table,” said Sheets.
Meanwhile, the structure of the bond market is drawing fresh scrutiny. Torsten Sløk, chief economist at Apollo Global, is watching hedge funds with leveraged positions in Treasury trades that could pose risks to liquidity if unwound quickly. “These trades use repos and other short-term funding, and if they unwind fast, that can ripple through,” Sløk said.
In normal times, the U.S. dollar and Treasury bonds serve as anchors of safety during periods of market stress. But recent trading behavior has upended that convention. Following the tariff announcements, the U.S. Dollar Index dropped 1.6% before rebounding, signaling uncertainty about America’s economic leadership and its role as the world’s financial haven.
Nathan Sheets, Citi’s chief global economist, is tracking the shift. “In previous crises, the dollar—and U.S. assets—are always the safe haven,” he said. “But as we shift terms of engagement with the rest of the world, does that increase risk premiums?”
Unusual volatility in short-term interest rate contracts and rising bond yields point to investor uncertainty about the Federal Reserve’s next move. Some expect rate hikes to combat tariff-driven inflation. Others predict rate cuts to offset slowing growth. “It’s all on the table,” said Sheets.
Meanwhile, the structure of the bond market is drawing fresh scrutiny. Torsten Sløk, chief economist at Apollo Global, is watching hedge funds with leveraged positions in Treasury trades that could pose risks to liquidity if unwound quickly. “These trades use repos and other short-term funding, and if they unwind fast, that can ripple through,” Sløk said.
Advisors: Brace for Volatility but Stick to the Plan
As volatility persists, financial advisors are urging clients to avoid panic and focus on long-term goals. “Volatility is part of the game,” said Douglas Boneparth, a New York-based certified financial planner. With the S&P 500 down sharply and the Nasdaq suffering its worst day since 2022, investors may feel compelled to act—but many professionals say the worst move is an emotional one.
“Don’t let your emotions wreck your investments,” advised Ed Snyder of Oaktree Financial Advisors. The danger of panic selling, he noted, is missing the eventual rebound. Historical data supports this: Missing the 20 best days in the market over a 20-year span could cut portfolio returns by more than half, according to J.P. Morgan Asset Management.
Advisors are also emphasizing preparation. A well-funded cash reserve—six to nine months of expenses—is a common recommendation. Lisa Kirchenbauer of Omega Wealth Management said, “Nothing helps navigate rough markets like having a healthy margin of safety.” For those nearing retirement, a shift toward more conservative allocations is prudent. “If you’re within three to five years of retirement, this is the time to de-risk,” said John Anderson of Equitable Advisors.
Still, not every client is in the same place. For younger investors, continued contributions to retirement plans at lower valuations could prove beneficial over the long term. Target-date funds and index-based strategies remain popular tools for managing through turbulent periods.
The bottom line from many advisors: Revisit your plan, rebalance if necessary, and resist the urge to time the market. As Kirchenbauer puts it, “There will be more ups and downs, more back and forth, more uncertainty before we get clarity.”
Conclusion
Markets are reacting to a highly unpredictable mix of economic policy, geopolitical tension, and investor psychology. While a full-blown crisis isn’t here yet, the ingredients are in place. Financial advisors and economists alike are watching for signs of fracture—but are also reminding investors to stay grounded. In a world where tweets can move markets, discipline may be the last safe haven.
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