Market Movers & Shakers

Stocks ended sharply lower on Friday as renewed trade and tariff tensions between the United States and China rattled markets. The S&P 500 and Nasdaq both touched fresh record highs early in the trading session, though quickly reversed lower after President Trump accused China on Truth Social of being “very hostile” over its actions on rare earth metals and export controls. President Trump threatened a “massive increase” in tariffs and said he saw “no reason” to meet with Chinese President Xi Jinping during the upcoming APEC conference in South Korea.



Source: FactSet

Friday’s selloff erased weekly gains, with the S&P 500 falling 2.71% and the Nasdaq sliding 3.56% for their steepest single day drops since the “Liberation Day” declines in early April. Wall Street’s fear gauge, the VIX, spiked more than 31%, jumping from just above 16 at the open to close the day above 21.50, its highest level since May. Although Friday’s selloff was relatively broad based, defensive and low-volatility segments of the market proved more resilient than the more speculative, risk-on areas, which suffered outsized declines. For instance, the Invesco S&P 500 High Beta ETF (SPHB) fell 4.78% on the day, while the Invesco S&P 500 Low Volatility ETF (SPLV) managed a 0.11% gain. From a sector perspective, Consumer Staples and Utilities led the pack, while Information Technology and Consumer Discretionary were the largest underperformers.

Shortly after markets closed on Friday, President Trump took to Truth Social once more to announce that the United States would impose new tariffs of 100% on imports from China (on top of existing tariffs) effective November 1st. President Trump also announced that the U.S. would impose export controls on “any and all critical software” starting the same day. The announcement sent markets another leg lower in after-hours trading and triggered a sharp selloff across the crypto complex. According to data from TradingView, the total market capitalization of the crypto market fell more than $800 billion from $4.1 trillion to $3.3 trillion in roughly six hours. More than $19 billion in leveraged positions were liquidated in what market participants described as a liquidity cascade, resulting in the largest 24-hour crypto liquidation on record, surpassing the FTX collapse in November 2022.



Source: TradingView

The newly announced U.S. tariffs are set to take effect one month before China’s own December 1st deadline, announced earlier in the week, requiring foreign entities to obtain a license to export any product containing more than 0.1% rare earth content sourced from China, or manufactured using Chinese extraction, refining, magnet-making or recycling technology. According to the U.S. Geological Survey, China accounts for 70% of the global rare earth supply. And even when mined elsewhere, say in the U.S. or in Australia, China controls ~90% of the rare earth refining, processing and magnet manufacturing supply chain. Rare earths and magnets are essential inputs for a huge range of advanced technologies, many of which are strategically important to the U.S. economy and national security. Everything from smartphones to semiconductors to electric vehicles and even F-35 fighter jets contain the materials. Given how tightly China dominates the rare earth supply chain, the licensing requirement marks a major escalation in the trade conflict, effectively weaponizing one of the most strategically constrained inputs in modern technology manufacturing.



Source: Bloomberg, US Geological Survey

The latest rise in trade tensions between the United States and China appears to be as much about posturing as policy. The saber rattling from both sides is widely viewed as an attempt to gain additional leverage ahead of another round of trade negotiations expected later this month. Futures found some relief on Sunday after Vice President JD Vance urged Beijing to “choose the path of reason” while President Trump struck a more conciliatory tone, posting: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”. Treasury Secretary Scott Bessent, widely seen by markets as a voice of reason within the administration, said the two sides would talk in the coming weeks and the threatened tariff hike did not need to happen. Stocks rebounded on Monday as tensions seemed to ease; however, Chinese authorities targeted U.S. shipbuilding early Tuesday morning by adding five U.S. subsidiaries of South Korean shipbuilder Hanwha Ocean to its sanctions list. The order, effective immediately, prohibits Chinese individuals and organizations from doing business with the companies. The latest tit-for-tat move sent equity futures lower as markets grapple with the potential impacts of ongoing escalations.

Elsewhere, the government shutdown is poised to enter a third week, with Congress at a stalemate and both sides of the aisle unsurprisingly blaming each other. The Trump administration has allocated “all available funds” to ensure that military personnel are paid on October 15th, but a prolonged shutdown would leave federal workers without paychecks until it is resolved. For now, markets have largely shrugged off the shutdown. Looking ahead, Q3 earnings season begins this week, with major U.S. banks reporting results that could help shape expectations for the broader market.

Updates & News*

The pace of Tandem’s transition of new accounts and deposits has accelerated in recent weeks as our investment process continues to identify ample opportunities to put cash to work. After one week of management, new funds in our manager-traded accounts are roughly halfway invested in our strategies. By the two-week mark, accounts are nearly two-thirds of the way in-line, and after one month of management are just under three-quarters of the way transitioned. Transition speeds on the front-end continue to run at a pace much quicker than historical norms.

In portfolio news, Intercontinental Exchange (ICE), owner of the New York Stock Exchange, announced a strategic investment in prediction market platform Polymarket. Under the terms of the agreement, ICE will invest up to $2 billion in Polymarket, reflecting a pre-money valuation of $8 billion. Alongside its investment, ICE will become a global distributor of Polymarket’s event-driven data. Prediction markets have seen a sharp rise in popularity since the 2024 U.S. Presidential election, attracting users eager to speculate on everything from sports outcomes to Federal Reserve policy decisions—and even how many times Elon Musk will post on social media within a given period. Elsewhere, The Wall Street Journal reported that Johnson & Johnson is exploring the potential acquisition of Protagonist Therapeutics, a move that would strengthen its existing immunology and oncology portfolio. The two companies already share a partnership, jointly developing an oral therapy for plaque psoriasis and ulcerative colitis. According to FactSet, Johnson & Johnson currently holds roughly 4% of Protagonist’s outstanding shares. While the deal has not been confirmed nor have potential terms been disclosed, any deal would likely come at a premium to Protagonist’s current $4-5 billion market capitalization.

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new manager-traded accounts and new money in manager-traded accounts, not the composite or firm-wide level. New manager-traded accounts and new money in manager-traded accounts are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions, this process differs from Tandem’s model-provided strategies, where money is invested on the day the account opens. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

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