E-Paper
Sign In
Trump tariffs impact: Volatility in global markets soars amid tweets
‘Everything is connected to everything else’, a most apt quote, especially these days
- PUBLISHED: Fri 25 Apr 2025, 3:35 PM UPDATED: Mon 2 Jun 2025, 1:52 PM
Trump’s tariffs, introduced on April 2, continue to rile the global markets, going from 2-3 per cent before April 2 to between 10 and 20 per cent today, and changing.
In the April 13 article, I mentioned that this was not a Black Swan event (unknown unknown). Now, I am introducing a new term called Grey Rhino event, a highly probable threat that is visible, but ignored (known unknown).
Recommended For You
In this context, the only constant is heightened volatility caused by assertive US President Donald Trump’s tweets (now it is Fed Chairman Jerome Powell’s turn) — a deluge of ever-changing information on tariffs, Ukraine, Middle East, and many more geopolitical and economic indicators.
Two thirds of S&P stocks are down 20 per cent from their highs and the index has gained or lost 1 per cent in seven of the last 10 sessions. For the first time, Wall Street is debating why ‘sell US’ is now taking hold among international investors.
One stock captures the volatility based on the new US political order. Tesla has gone from $488 (Dh1,792) — Trump bump as Musk was announced head of Department of Government Efficiency — in December 2024 to $220 before a mini rise to $250. This highlights the impact of Musk’s involvement with Trump and shows the impact of mixing politics with finance and economics.
JP Morgan and other Wall Street firms are delving deep into creating scenarios and assigning probabilities of what might unfold.
As expected, the probabilities by firms form a wide spectrum, making the whole exercise confusing. Nevertheless, the higher probability scenario goes like this:
Over the decades, bond vigilantes have a way of getting politicians to pare back on extreme adventures. Today, the US government has to refinance $10 trillion of debt. Higher rates will increase the growing budget deficit due to the expected tax cuts. That is why the 10-year Treasury Bond is hovering around 4.5 per cent.
Wall Street pundits are currently projecting a range of 5,000 to 5,500 for S&P for year-end, around the same price as now. This shows that no one really knows about the short-term outlook.
Trump is focused on US markets and has moderated his tweets on tariffs, China, and Chair Powell, whenever the market slides. This is well captured by The Wall Street Journal’s recent headline: ‘Trump Meets His Match: The Markets’.
Higher inflation can cause stagflation and some analysts are saying it may have already begun. A sharp fall in the US dollar is making imports more expensive and that is beginning to seep into prices gradually.
So what to do and what to watch for? On the ‘do’ front, please see my April 13 article. As John Bogle, founder of Vanguard and father of exchange-traded funds, said: “Time is your friend, impulse is your enemy.”
In a risk-off world, return of investments is more important than risk on investments. Preserving wealth in the short-term is paramount. Long-term, the US is still the most innovative, largest and liquid equity and bond market.
High-net-worth individuals are asking about not just what to do with their investments but also about structures, safety and succession. Some are moving the conversation’s focus from rebalancing to actually relocating, albeit this is at a preliminary stage. Middle East and Asia look relatively attractive for their dynamism, low taxes, safety and quality
of life.
Malik S. Sarwar is the CEO, K2 Leaders Senior Partner, Global Leader Group, USA