Tariffs Now, Exemptions Never
Trump isn’t bluffing this time. The White House confirmed that his long-threatened “reciprocal tariffs” will take effect immediately after the announcement. That’s on top of the 25% auto import duties signed last week and the ramped-up 20% tariffs on Chinese goods.
There are no exemptions, no negotiation windows, and no clarity on where the escalation stops. The only thing we do know? The market’s been pricing in pain for a month. With the Nasdaq riding on the backs of the Magnificent Seven, which had the worst month and quarter on record, the rest of the market is also flashing red flags.
The Magnificent 7 tracking ETF (MAGS) says it all with roughly a 25% drop from the high 69 trading days ago. That’s not great news for the broader market since the Mag7 represents more than 25% of the entire S&P 500 market value.
So, why is the Mag7 on the rise (over the last two trading days)? It’s the beginning of the month, so I suspect some of this movement is from portfolio reallocation and some funds tipping their toes back in the water after the biggest names in tech have been hit hard over the past quarter.
To put that in perspective, the broader technology stocks are down 15% from peak to trough during that same time period.
It’s not surprising to see some institutional cash flowing into big tech companies that have been hit the hardest, but that doesn’t mean this is the time to be bullish either.
Economic Data: Bad News, Worse Timing
Tuesday’s economic data was tailor-made to stir up stagflation fears. JOLTS job openings came in soft.
The ISM manufacturing index hit a 4-month low.
And inflation reared its head with a spike in manufacturing input prices not seen in nearly three years.
As an investor, do you believe that consumers will continue to spend money to compensate for tariffs or slow their spending? Do you believe that companies will eat the cost of tariffs to save consumers? If companies absorb the higher prices, what will happen to their stock prices as profit margins shrink?
What’s Working (For Now)
So who’s surviving?
- Mega-cap tech The Magnificent Seven carried the indexes higher in the last two days, masking broader weakness. But even here, margins are at risk if supply chains get squeezed.
- Gold and Treasuries are back in the spotlight. GLD, TLT, and other safe-haven ETFs saw a spike in volume and inflows. This is classic risk-hedging behavior.
Domestic-focused sectors like energy, utilities, and regional banks are outperforming, for now. But if rate volatility flares up, even these pockets could turn sour.
That combo—slowing growth and rising prices—is about as market-unfriendly as it gets. The bond market got the memo. Risk-off isn’t just a mood—it’s a strategy now.
0DTE Options: Volatility on a Leash (Barely)
Traders are leaning into 0DTE options to play the tape minute-by-minute ahead of the 3 PM tariff reveal. Implied vol is ticking higher across the board, especially in S&P and Nasdaq short-term contracts. Expect fireworks around the announcement, and watch the VIX—if it spikes, that’s your red alert. For now, we’re still below the high we saw in mid-March.
Bottom Line
This isn’t just about tariffs. It’s about permanent policy shifts meeting a market that’s already skittish about earnings, inflation, and slowing growth. Today’s 3 PM announcement is more than political theater—it’s a potential catalyst for a broader breakdown.
The big question now: Will investors head back into the Magnificent Seven, or is the next leg down just one policy headline away?
