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The S&P 500 Suffered Its Worst Week of 2019 — And Its Not Finished Falling (#GotBitcoin?)

Investors entered the week hoping for a repeat of the 1990s. Instead, they might get a rerun of That ’70s Show. The S&P 500 Suffered Its Worst Week of 2019 — And Its Not Finished Falling (#GotBitcoin?)

This past week began with the market expecting a quarter-point rate cut from the Federal Reserve and hoping for a sign that more were to come. Fed Chairman Jerome Powell delivered on the first, but called the cut a “midcycle adjustment,” dashing hopes for investors expecting more than one-and-done and causing stocks to tumble on Wednesday.

Of course, the Fed’s rate cuts back in 1995 were also part of a “midcycle adjustment” by former Fed Chairman Alan Greenspan, which helped juice markets for another five years or so. The market seemed to figure that out as the Dow Jones Industrial Average rallied more than 300 points on Thursday before President Donald Trump’s tweets about new tariffs on China hit.

Trump announced 10% tariffs on the $300 billion of Chinese goods, set to begin in September, that have so far avoided them, and it ricocheted through the market. The Dow finished the week down 707.44 points, or 2.6%, at 26,485.01, while the S&P 500 index dropped 3.1% to 2932.05, and the Nasdaq Composite slumped 3.9% to 8004.07. It was the worst drop for the latter two since the week ended on Dec. 21, 2018.

We should have seen this one coming. Trump hadn’t exactly been quiet on the trade front—on Tuesday he tweeted that “the problem with China, they just don’t come through”—and it was simply a matter of time before the issue flared up again. Similarly, it’s simply a matter of time before there’s another “breakthrough” on the trade front for the president to tout.

That doesn’t make us any less worried. Since January 2018, market peaks have coincided with tariff news, notes Deutsche Bank strategist Alan Ruskin. The first tariffs, for instance, were put in place toward the end of that month, precipitating a 10% decline in the S&P 500 after a rip-roaring start to the year. The S&P 500 Suffered, The S&P 500 Suffered

 

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