Weekly Market Commentary: Markets rebound amid tariff turbulence

US markets rebound, but global weakness persists

Last week, US stock markets staged a partial recovery after a rocky period, with the S&P 500 climbing 5.7%. This rebound, driven by a 9.5% surge on Wednesday, recouped nearly half of the index’s 10.7% drop following the tariff announcements on 2 April, marking its strongest week since November 2023. The rally came after President Trump delayed most reciprocal tariffs by 90 days, easing immediate concerns. However, US Treasuries faced pressure, with the 10-year yield rising almost 50 basis points (bps) to 4.5%, the largest weekly jump since 2001. Globally, markets were less buoyant—Europe’s STOXX 600 fell 1.92%, and Japan’s Nikkei dipped 0.58%. Gold, meanwhile, soared 6.56% to a record high, underscoring its safe-haven appeal amid uncertainty.

Tariff pause eases fears, but tensions remain

The tariff landscape shifted dramatically midweek when Trump announced a 90-day pause on reciprocal tariffs above a 10% baseline for most countries, excluding China, while maintaining separate tariffs on Canada and Mexico. This pause sparked a relief rally, but the US-China trade war subsequently worsened, with US tariffs on Chinese goods now at 145% and China retaliating with 125% tariffs on US exports—essentially a trade embargo in all but name. Trump hinted at possible talks with Chinese President Xi Jinping, but for now, tensions remain high. While the tariff delay offers a breather, it is not a complete reversal, and the ongoing 10% blanket tariffs continue to weigh on global trade. Prolonged uncertainty risks shaking business and consumer confidence, potentially impacting economies worldwide.

Economic signals mixed amid risks

Despite the market’s upbeat response, risks persist. Inflation signals are mixed—March’s core Consumer Price Index (CPI) rose just 0.1% month-on-month, the smallest increase since January 2021, but consumer sentiment hit a low not seen since June 2022, with inflation expectations spiking to 6.7%, the highest since 1981. Rising bond yields and a weaker US dollar reflect unease about policy uncertainty. Businesses, including Amazon, warn that tariff costs may hit consumers, and polls show most Americans expect higher prices. This volatility challenges the narrative of US economic strength, fuelling trends like US dollar weakness and higher long-term bond yields.

Uncertainty Calls for Caution

We emphasise maintaining a disciplined investment approach in the face of market volatility. Given Trump’s unpredictable policymaking, it is prudent to remain cautious and avoid reactionary decisions. The persistence of tariff-driven instability continues to undermine the US exceptionalism narrative, accelerating de-dollarisation and deglobalisation trends. With ongoing policy unpredictability and financial market instability, patience and diversified positioning remain the best course for investors navigating this turbulent period.