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“The signing of this act is a momentous occasion in the world’s quest for enduring peace.” – Harry Truman
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77 years ago today, President Truman made the comments above about his signing the Economic Assistance Act, better known as the Marshall Plan, into law. The Marshall Plan’s primary purpose was to help Western and Southern European countries recover from World War II by rebuilding cities and industries devastated by the war, removing trade barriers between European countries, and creating a more conducive environment between Europe and the US.
By almost all accounts, the Marshall Plan was a big success. But just one day shy of 77 years later, President Trump declared “Liberation Day” and signed an executive order instituting new punishing tariffs on countries around the world. While the tariffs were referred to as reciprocal, the levels were shocking and sent stocks plunging after hours.
Arguments can be made that other countries have been ripping the United States off by charging high levels of tariffs to US exporters. Unlike the Marshall Plan, though, which was meant to aid international economies and foster open trade between countries (even if they placed the US at a disadvantage), last night’s executive order did the opposite. The tariffs enacted by “Liberation Day” will enact a slew of protectionist policies for domestic industries and restrict international trade. If the Marshall Plan was a helping hand to the rest of the world, “Liberation Day” is a big middle finger.
What’s most ironic about last night’s tariff announcements and the rhetoric we’ve heard since Trump came into office is that while the President says he is acting to help US companies, it’s the US stock market that is down the most. The table below shows the performance of the ETFs that track the ten largest global economies. For each one, we show their YTD performance through yesterday’s close and then where they’re trading this morning. Heading into yesterday’s tariff announcement, the US was already the worst performing of the ten largest global economies, and since the announcement last night, the S&P 500 is off 3.4%, as measured by SPY, while none of the other nine ETFs are down as much.
With global markets lower and US futures sharply lower, the S&P 500, as proxied by the SPDR S&P 500 ETF (SPY), is on pace to break below the lows from earlier this week. The next level of potential support is the post-Labor Day September lows and then the lows from last August. That said, markets are rudderless at this point as the level of tariffs outlined last night will only exacerbate consumer and investor concerns about the outlook and create more uncertainty.
Today’s decline will be SPY’s seventh straight downside gap at the open. That ranks as the longest streak since early 2016 and is only one of only seven streaks with as many or more consecutive days of negative selling pressure at the open. The longest streak was ten days in August 2015.
