Tariffs – On or Off?

Ongoing trade policies under the Trump administration continue to inject uncertainty into the global markets. On April 9th, a blanket tariff of 10% was instituted on all imported goods, with exceptions for certain sectors. Additionally, the U.S. raised tariffs on Chinese imports from 20% to a staggering 145%, prompting China to retaliate with tariffs of 125% on American goods. Adding to the uncertainty, the Trump administration has been inconsistent in its approach, recently exempting certain electronics only to reverse course and announce new duties on these products within the next two months. This has left both businesses and investors grappling with unpredictable policy shifts and widespread market volatility.

In April, the closely watched Michigan Consumer Sentiment Index plunged to 50.8, one of the weakest readings of the past decade, from 57 in March. This decline reflects broader concerns about the economic impact of trade policies, which have already begun to restrain business activity and increase production costs. Prominent companies have pulled back earnings guidance or significantly pared it down, reflecting an increased cautiousness in this complex market environment and worries about potential stagflation or a recession.

From the March 2025 Market Commentary, the US trade deficit has slightly improved, decreasing to $122.66 billion in February. Despite the reduction, concerns remain about the efficacy of tariffs in reducing the balance of trade. A weaker dollar has historically served as a boon for US exporters; however, any benefits may be offset by reduced demand for US goods because of retaliatory tariffs.

The manufacturing sector, in particular, is experiencing mixed outcomes. While domestic producers have seen manufacturing orders tick up, that was offset by declining exports and higher costs. Consumers are bearing a large portion of the resulting price increases, with the prices charged by businesses for goods and services increasing to 13-month highs in March according to leading global indices.

Digital Assets – Power for the future.

Digital currencies and stablecoins present opportunities and challenges to economic stability along with the expansion of the digital asset market, exceeding $2 trillion. While stablecoins can enhance payment efficiency and financial inclusion, their scaling capacity raises systemic risk and monetary policy concerns. The US Treasury emphasizes the need for comprehensive regulation to mitigate risks like market runs, while the Federal Reserve favors stablecoins to potentially maintain the US dollar’s international prominence, taking a more measured approach towards CBDCs. The Treasury Borrowing Advisory Committee (TBAC) warns of potential financial market instability from stablecoin collapses. However, the Federal Reserve has recently relaxed its stance on banks’ cryptocurrency activities, suggesting growing acceptance of digital asset integration into the conventional financial system.

The proposed GENIUS Act seeks to establish a clear regulatory framework for payment stablecoins in the US. Key provisions include licensing for issuers, mandatory 1:1 reserve backing, and transparency through audits and disclosures. The Act proposes federal oversight for issuers exceeding $10 billion and a state-level option for smaller issuers meeting similar standards. By clarifying that payment stablecoins are not securities, the GENIUS Act aims to foster innovation and growth in digital payments. Significant bipartisan support suggests a pathway towards defined stablecoin regulation, potentially influencing their widespread adoption.

USD1, a stablecoin initiative backed by World Liberty Financial and inspired by President Trump, represents a prominent private sector development. USD1 is committed to full backing by traditional US financial instruments to enhance confidence and institutional adoption.

Major US banks like JPMorgan Chase, Goldman Sachs, and Bank of America are exploring and implementing blockchain technology across various financial products and services, including asset tokenization, blockchain-based payment systems, and DeFi applications. This banking engagement could significantly increase digital asset market liquidity and institutional adoption, and spur novel crypto-based solutions. However, USD1’s political affiliations raise questions about regulatory independence and potential market distortions.

In conclusion, a balanced approach is crucial to encourage innovation while safeguarding financial stability, ensuring consumer protection, and preserving the US dollar’s global standing. Ongoing vigilance and adaptive regulation are essential to harness the benefits of digital currencies and stablecoins while mitigating their risks.

Trading 24/7 – Potential for Greatness

The potential shift towards near 24/7 US equity trading is primarily driven by increasing global demand for US equities, technological advancements, and the precedent set by continuous markets like cryptocurrencies. Elevated foreign holdings, which have grown significantly, necessitate market access beyond traditional US hours for international investors seeking greater flexibility and faster reactions to global news and economic data releases as they occur in their local time zones. This move is strongly supported by key figures at major institutions such as Nasdaq, NYSE, and CBOE, who are actively developing plans for extended trading. Crucial infrastructure adaptations are underway, exemplified by the Depository Trust & Clearing Corporation’s planned extension of clearing hours to a 24×5 schedule by the second quarter of 2026, which is essential for facilitating continuous settlement. The potential benefits include significantly enhanced international investor accessibility, fostering greater global participation in US markets and potentially increasing market depth and liquidity over time. Continuous trading could also allow for more immediate reactions to global events, potentially mitigating price gaps that often appear at market openings and contributing to more efficient price discovery. This transition ultimately aims to align US markets more closely with the interconnected and continuously operating global economy.

However, this transition presents significant risks and challenges that require careful consideration. Notably, there is a concern about reduced liquidity during off-peak hours, particularly overnight, which could lead to wider bid-ask spreads and increased volatility. This lower liquidity, potentially compounded by the dominance of algorithmic trading during these times, could make executing large trades more difficult and costly. Operational and regulatory requirements are substantial, which calls for significant investment in technology upgrades and adaptation of compliance and surveillance systems to monitor activity around the clock.

Complexities may also arise in managing corporate actions, such as dividends and stock splits, in a continuous trading environment. Additionally, concerns exist regarding potential professional fatigue among market participants facing constant market pressure.

Macroeconomically, 24/7 trading could attract greater foreign investment, impact capital flows and potentially influencing the USD exchange rate. It may also create new arbitrage opportunities between different global markets and deepen global financial system integration, potentially amplifying the transmission of economic shocks. Insights from current extended hours show growing usage but suggest less efficient price discovery off-hours due to lower liquidity. Experiences in other markets, like the US Treasuries market which operates nearly 24/7 but sees activity concentrated during US hours, indicate that the majority of trading may still occur within traditional times. Expert and academic views remain mixed, acknowledging the benefits but raising concerns about liquidity, volatility, and operational costs, with some research suggesting that periodic closures might enhance liquidity by concentrating trading activity.

Key Market Indicies

*Market Indices as of 4/30/2025