Market Updates

There’s been a welcome swing in market sentiment since the agreement between the US and China to reduce tariffs for the next 90 days. Compared to the sky-high numbers announced in April, this agreement marks a notable de-escalation in tensions. That said, it’s only a 90-day reduction (with uncertainty about what comes next), which still leaves tariffs at historically high levels not seen since the 1940s.

April was a rollercoaster month in financial markets, starting with the announcement of the US trade tariffs on 2 April which led to an equity sell-off. The market moves we witnessed were truly historic in their speed, compounded by the subsequent retaliation from China.

On April 15, we hosted a special 30-minute webcast focusing on the impact of US tariffs on the global economy and markets. Our speakers were Daniele Antonucci, Chief Investment Officer at Quintet, and Bruno Rovelli, Chair of EMEA Allocation Council Investment Solutions at BlackRock. We received many questions during the webinar. Below, we’ve answered those we didn’t have time to answer during the call.

Over the past week, financial markets experienced significant volatility primarily due to abrupt shifts in US trade policy. Although President Trump announced a 90-day pause on the reciprocal tariffs, the 10% overall tariff is still in place and the ‘trade war’ with China has escalated. We think the latest tariff announcement, including the temporary suspension excluding China, might be tightly related to the impact on financial markets, which anticipate the effects on the real economy.

The US finally announced broad tariffs on key trading partners on 2 April, bringing effective US tariff rates to levels not seen in a century. These measures include a baseline universal rate of 10% as well as targeted reciprocal tariffs, which range from 10% to 50%. What’s next | Markets deciphering new tariffs while we’re looking at the broader US policy mix

In the eyes of the Trump Administration, tariffs reflect a strategy to address international trade imbalances, support domestic industries and respond to geopolitical concerns. However, tariffs have also led to increased tensions with trading partners and raised concerns about potential growth and inflation impacts both domestically and internationally.

Last week, both German chambers, the Bundestag and Bundesrat, approved a constitutional amendment with over two-thirds of the votes. This decision allows for a 10-year defence budget and a 12-year infrastructure funding plan.

At the start of 2025, many investors believed that US President Trump’s policies would extend US economic and market exceptionalism. Now, two and a half months later, US equity indices have dropped about 6%, with the dollar being down 4.5%, and Treasury yields have fallen a quarter-percent.

The idea of US exceptionalism has to do with the outperformance of the US economy and the corporate sector because of stronger fundamentals, an AI-driven innovation boost and supportive policies, as investors have experienced over the past couple of years.

At face value, a peace deal should be a positive catalyst for markets, particularly in Europe. So why did markets close on a mixed note last week?

US inflation in January was higher than expected at around 3% for both headline and core inflation (which strips out volatile components). This was mainly due to rising energy prices, along with price increases in used cars, motor insurance, medical care commodities, and airline fares.

Last week was dominated by investors digesting the implications of President Trump imposing a 25% tariff on imports from Mexico and Canada, and 10% on China, plus a 25% tariff on steel and aluminium. Canada and Mexico vowed retaliation but then negotiated some measures leading to the temporary suspension of the US tariffs.