A week after Liberation Day tariffs sent stock markets down by around 10%, warnings of a stock market crash are rising. In Tuesday’s trading, retail investors who bet on selling to ease paid a price. Apple (AAPL) shares fell after the Press Secretary said that the President believes the U.S. may make iPhones domestically.
The U.S. manufacturing infrastructure cannot compete with that of China, Vietnam, and India, which offer low-cost labor. The chances are low that Apple CEO Tim Cook would build them in the U.S. Costs would skyrocket. It would force Apple to either give up its 24% profit margin or raise prices, hurting demand.
As of late last night, the trade war worsened when the U.S. said it would impose a 104% tariff rate against China. China angered the U.S. when it imposed retaliatory tariffs without hesitation. Investors should continue to avoid Chinese e-commerce firms, including Alibaba (BABA) and JD.com (JD). South Korea’s Coupang (CPNG) and Singapore’s Sea Ltd. (SE) may offer lower risks.
Beware of Bonds
U.S. Treasury bonds are not safe investments at this time. Traditionally, when stocks fall, investors would rotate to bonds. This time, hedge funds, the Chinese government, and investors sold treasury bonds. The 7-10 year (IEF) and 20+ year (TLT) both fell in recent days.
Your Takeaway
A stock market crash from here is unlikely. Daily price volatility of between +/- 2% to 4% is more likely.