One of the most pivotal weeks in years — even decades — for the global economy has closed to the sound of the Nasdaq crashing into a bear market as investors fear US President Donald Trump's trade war will tip the world into recession.
Less than 48 hours after Trump raised tariff barriers to the highest in over a century, China on Friday said it would slap additional 34 percent duties on all US imports, escalating the global trade war to new, dangerous heights.
Any hopes investors had of Federal Reserve Chair Jerome Powell coming to the rescue by signaling a readiness to cut interest rates — as Trump had appeared to pressure him into doing in a social media post earlier in the day — were dashed, as Powell stressed the "elevated risks" to both growth and inflation.
This 'wait and see' approach rattled Wall Street further — the S&P 500's 6 percent slump meant the index's market cap plunged $5 trillion in just two days.
The Fed is in a real bind, faced with the rapidly rising risk of recession and soaring price pressures. Treasuries may have been caught between these two stools on Friday, but it is crystal clear where rates traders are putting their money — four rate cuts are fully priced in for this year, starting in June.
However, given the ferocity of the equity market selloff, collapse in confidence and extraordinarily uncertain outlook, it wouldn't be a total shock if the Fed cut rates at its May 6-7 meeting. Indeed, could an inter-meeting move be ruled out if the market rout continues next week?
This is the heaviest slide across global stocks since the pandemic in 2020. But unlike that crash and the Global Financial Crisis in 2008, the current turmoil on Wall Street is a result of clear-headed policy choices made by a government that would have known this kind of outcome was distinctly possible, if not highly likely.
Many analysts reckon this hasn't been seen before. Some of the economic and market numbers that have been seared into investors' consciousness this week haven't been seen for a long time either:
Some call for suspension of investment in the US, while others say the tariffs may contravene World Trade Organization rules.
Highest US tariffs in over 100 years
Effectively the biggest US tax rise since 1968, according to JP Morgan analysts, who now say a global recession is more likely than not — $5 trillion of US equity market cap wiped out in two days, bringing the total market cap lost since Trump's inauguration in January to nearly $8 trillion.
Economists at Barclays now reckon US inflation will exceed 4 percent this year while GDP will contract in the fourth quarter, a move "consistent with recession".
The rest of the world won't escape the pain.
Economists at Citi say up to one percentage point will be knocked off euro zone growth this year, pushing the bloc to the brink of recession, while China could suffer a similar blow to its GDP growth, which they say was already slowing to sub-5 percent.
With global demand set to suddenly slow, if not contract, oil prices on Friday slumped more than 6 percent for a second straight day. Brent crude futures hit a four-year low near $62 a barrel, and are now down 26 percent from a year ago.
And last, but by no means least, for a brief moment on Friday the benchmark two-year Swiss government bond yield fell below zero. Granted, it is Switzerland, where official rates are just 0.25 percent. But there aren't many clearer signs that investors are worried.
Markets will be closed at the weekend but the lines of communication between policymakers around the world will very much be open, as governments frantically try to de-escalate the global trade war and central bankers weigh up their policy response.
Monday promises to be another rocky ride.
"We will not stand idly by during Trump's tariff war," said California Governor Gavin Newsom. "California is not Washington, DC."
