By Naomi Rovnick and Amanda Cooper
London (Reuters) global markets tell contradictory stories about the possible longer -term effects of US tariffs on growth. A schism that investors say that either stocks or bonds could see a strong correction as soon as it is clear what is right.
The unpredictable approach of US President Donald Trump to trade policy, which caused so much volatility at the beginning of this year, seems to have carefully react to its almost daily announcements, who or what could be hit with tariffs.
The latest goal is Canada, which said on Thursday that Trump will be exposed to 35%, while most other trading partners receive flat -rate tariffs of 15 or 20%, which hardly causes fluttering in the broader markets. An announcement to Europe is imminent.
Investors say that this obvious serenity is less the trust in a long -term outlook, and more typical of a bull market in the late stage, in which the optimists strive to catch the rally before the pessimists prepare quietly for difficult times.
In a corner there are more risky assets such as stocks and cryptocurrencies. The shares on Wall Street have reached record highs that are driven by enthusiasm for artificial intelligence and the view of a series of interest disorders of the Federal Reserve by the Federal Reserve, since the economy is gradually slowing down and the hits of tariffs have so far been mild. Bitcoin is near 112,000 US dollars.
In the other corner there are government bonds, gold and even crude oil, all of which reflect the conviction that the tariffs could cause the US economy and growth anywhere.
Neil Birrell, Chief Investment Officer from Premier Miton, said the second half of this year it would be if the effects of Trump’s tariffs become obvious.
“It is difficult for me to look at all of this with any form of trust or certainty,” he said, referring to the unpredictability of Trump’s political design and the possible effects of his “a great nice calculation”.
His main concern over stocks was the high participation of the US households on Wall Street, where a decline could spread quickly worldwide.
“Every stress in the US economy that affects the consumer and then affects the stock markets becomes a rather brutal and bloody downward spiral.”
The 90-day break from Trump according to the “tariff” of the “Liberation Day” on April 2 was replaced by a scattergun application of taxes on trading partners, right before the winning season in the second quarter, which may result in the first information on how serious the hit for corporate profits could be.
“Things have settled, but not positive,” said Amundis head of global Macro Mahmood Pradhan.
“The effective tariff set for all imports that come to the USA would be about 15%if you calculate an average across the board,” he said. “On the whole, this is negative for growth in every country that is involved in world trade.”
Last month, the World Bank reduced its global growth forecast for 2025 by four tenths of percentage to 2.3%, which was pointed out that higher tariffs and increased uncertainties for almost all economies showed a “significant headwind”.
With so much uncertainty that depends on US assets, investors’ cash this year has flown to European stocks and bonds, gold, Chinese tech shares or emerging market currencies.
Fating the bikes of the stock market rally was expected that Fed Chairman Jerome Powell will strive for the pressure from Trump to deliver a fast series of interest rate cuts.
However, the data was too strong to justify an aggressive loosening of monetary policy, and too soft to argue that tariffs have no effect. US employment figures show that the economy is still creating jobs in a corporate clip, while business surveys show factories and services.
In the meantime, Trump’s pioneering tax cut and expenditure calculation will give the national deficit an additional 3.3 trillion dollars.
Benchmark 10-year-old US financial yield income (^Tnx) from 4.8% from the 15-month peaks to 4.35%.
“The bonds focus much more on growth (fall) than on inflation. Strategist at Dutch Asset Manager van Lanschot Kempen Kempe said.
“We don’t believe that this can go on,” he said, adding that he stays neutral in shares, with a small overweight position in state bonds.
Gold (GC = F) this year has organized a 26% rally that has exceeded 3,300 US dollars per ounce and served as protection against macro and geopolitical uncertainty, as well as an alternative to the dollar, the largest tariff victim, which has lost more than 10% in value this year.
Kevin Thozet, a member of the Investment Committee at French Asset Manager Carmignac, said that he deviated against a decline in the US stock market, it is of the opinion that this is currently unlikely, since retail dealers are immersed for the purchase of market dips.
In addition, he said that Trump’s tax cut could compensate for some of the effects of tariffs, but the additional debts that could take to finance these cuts could increase the 10-year ministry of finance to 5% in the next three months, which deals with political decision-makers about their effects on households, companies and the government.
“We see significant cracks in the US markets, although the Fed has plenty of space to cut,” he said.
(Reporting by Amanda Cooper and Naomi Rovnick; Editor from Elaine Hardcastle)
