“We are witnessing a rewiring of the global trade system that is negatively impacting sentiment towards US assets, while European and Indian assets may emerge as long-term winners.”
- Uncertainty on US trade policy and its potential impact on economic activity will keep market volatility high.
- Geographical diversification* is key, while gold is also benefitting in this market environment.
- Tariffs will lead to lower growth and higher inflation. Corporate profits are likely to come under pressure.
Over the past week, markets have experienced extreme uncertainty caused by US policy gyrations on tariffs. This uncertainty has started to weigh on US assets, including the dollar and US Treasuries. Despite the 90-day pause announced on 9 April, the US average tariff rate remains at a 100-year high, with rising US tariffs on China triggering retaliation from the latter. We are moving towards a rewiring of the global trade system that will have long-lasting implications for financial markets. In the China-US competition, Europe could benefit. Tariffs will affect the global economy through lower growth and higher inflation, ultimately impacting corporate profits. Against this backdrop, we believe investors should remain cautious, diversify* across markets and geographies, and consider gold.
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