Trumps customs policy leads to distortions on the stock markets
Reading time:15 MIN
Current market commentary
The last few weeks have been characterised by historic volatility due to Donald Trump's erratic tariff policy. Following the announcement of massive punitive tariffs, the S&P 500 suffered its fourth-largest two-day loss since the Second World War, only to record its best day since the global financial crisis a short time later and one tariff pause later. The bond markets were no less volatile: risk premiums on corporate bonds rose considerably. And even US government bonds recently recorded rising yields despite recession worries, as margin calls triggered by the market stress forced hedge funds to liquidate so-called ‘basis trades’. Despite somewhat more conciliatory tones from Washington recently, uncertainty is likely to weigh on consumption and investment as long as Trump does not make any concrete deals, meaning that companies are likely to revise their outlooks downwards during the reporting season. We took advantage of the recent turmoil to temporarily overweight equities, which we have already liquidated profitably.
Short-term outlook
The US first-quarter earnings reporting season is gathering pace: Nearly 40% of the S&P 500 market cap will report in the next two weeks. Markets are entering the reporting season with the most uncertainty since 2020, as supply chain uncertainty is currently very high due to Trump's tariff policy. Monetary policy will be in focus on 17 April with the ECB's interest rate decision. On the economic front, Chinese import data ( Mar.) will be released today and German industrial production data (Feb.) and ZEW economic expectations ( Apr.) will be released tomorrow. On Wednesday, euro zone consumer prices ( Mar.) and US retail sales ( Mar.) and industrial production ( Mar.) are on the agenda. US housing data ( Mar.) and the Philadelphia Fed index ( Apr.) will follow on Thursday. The following week will see the release of the flash PMIs ( Apr.) for the US, Germany and the rest of the eurozone.
Trump's customs policy leads to distortions on the stock markets
- Donald Trump's unpredictable tariff policy triggered extreme volatility on the global financial markets.
- The S&P 500 recorded its biggest 2-day loss since the coronavirus crisis, falling by more than 10%. The DAX also lost double digits, the Hang Seng even lost more than 13% in just one day, the Nasdaq 100 slipped into a bear market and the VIX rose above 50.
- The surprising tariff pause led to the strongest daily rise in the S&P 500 since 2008, at almost 10%. Without concrete deals from Trump, it may remain volatile.