Greed and Fear: Christopher Wood warns of ‘waterfall decline’ in US markets amid tariff turmoil

Christopher Wood, global strategist at Jefferies and author of the influential GREED & fear note, has sounded a dire warning about the US equity markets. In his latest commentary, Wood flagged a growing risk of a “waterfall decline” in US stocks, calling it the base case scenario as trade tensions and policy missteps mount. As market turmoil continues globally, Wood’s cautionary tone suggests that investor optimism may be dangerously misplaced.

According to the GREED & fear note, the looming market crash is not merely about stretched valuations. Instead, Wood argued, the real risk lies in a potential “panic unwind” of passive investment flows. “Everybody owns the same stocks,” the note emphasized, warning that if a sharp correction begins, it could rapidly cascade as passive holders dump their holdings en masse.

Wood highlighted the negative impact of the recent tariff hikes, likening the situation to the historical precedent of the 1930 Smoot-Hawley Tariff Act—widely blamed for deepening the Great Depression. “This is an impoverishment day, not a liberation day, in our view,” he stated. The report also observed that the weakening of the US dollar flies in the face of the expectations of US economic policymakers such as Stephen Miran, Chairman of the Council of Economic Advisers.

Vacuum in Trump Administration's Economic Leadership Worsens Outlook

Wood didn’t mince words when assessing the current US administration’s approach to economic policy. He lamented the lack of a moderating voice to rein in former President Donald Trump’s “more extreme instincts,” particularly on trade. In his view, the first Trump administration benefitted from the presence of then-Treasury Secretary Steven Mnuchin, who played a key role in containing protectionist impulses.

Now, with Elon Musk reportedly exiting his advisory role in late May and no strong economic hand steering policy, Wood warned that the risks of ill-conceived trade actions are growing. “It is becoming ever more apparent that the second Trump administration is missing a person on the economy,” he said, implying that policy decisions may become increasingly erratic as a result.

Portfolio Update: India, China Remain Key Bets

Despite global volatility, Wood’s model portfolio remains heavily tilted toward Asia. According to the note, the allocation includes 41 percent in India and 32 percent in China. An additional 8 percent is split between Taiwan and South Korean technology stocks, slightly down from 14 percent at the end of 2024.

In performance terms, the portfolio's Indian stocks fell 6 percent in USD terms during the previous quarter, while Chinese holdings surged by 18.6 percent, GREED & fear reported. The divergence, Wood suggested, underscores the growing investor preference for China in the short term, even as India remains a long-term core holding.

Global Meltdown Intensifies as Trump Digs In

Financial markets are already showing signs of severe distress. As per the note, S&P 500 futures pointed to a 5 percent plunge, signaling more pain ahead when Wall Street opens. Treasury yields dropped as investors rushed into safer assets, while stock markets across Europe and Asia witnessed their worst selloffs since the 2008 financial crisis. Europe’s Stoxx 600 fell 6 percent, while Asia’s benchmark index logged its sharpest decline in more than 15 years.

Meanwhile, President Trump doubled down on his tariff strategy. “Forget markets for a second,” he told reporters, suggesting he remains unmoved by the market reaction. The president declared that no deals to cut tariffs would be made unless the US trade deficit with the other country is eliminated—a stance that has only heightened investor anxiety.

Adding to the uncertainty, China said it would impose retaliatory tariffs of its own, and advisors reportedly urged Trump to reconsider before reciprocal tariffs are implemented on April 9. With the Federal Reserve now under pressure to respond, Wood warned that the situation could become even more complex if stagflation—rising inflation amid economic stagnation—takes hold due to the tariffs.

In summary, Christopher Wood’s latest GREED & fear note paints a grim picture for US equity markets, with a “waterfall decline” no longer just a risk but the base case scenario. As tariff tensions escalate and passive investment flows teeter on the edge of disorderly unwinding, Wood’s concerns about weak economic leadership and policy unpredictability resonate strongly. For investors, the message is clear: brace for volatility, stay diversified, and monitor policy moves closely, especially with the April 9 tariff deadline approaching.

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