The S&P500 has moved by more than 1% in either direction on 21 days since the end of January, the same number as in the entire 18 months prior. Stockmarkets are faced with renewed choppiness – concerns about rising bond yields have shifted to the potential for corporate profits to be undermined if a trade war erupts.
The Trump administration has announced a raft of protectionist measures ,most notably against China. The tail risk is an escalation in tit-for-tat tariffs that leads to a full blown trade war. However we’re likely to see a negotiated settlement.
Is this Trump’s ‘Art of the deal’ applied to trade? Where extremely strong rhetoric is followed by measured policy statements, leading other parties to the negotiating table.
The macro fundamentals have not shifted yet. Growth remains robust, however, the global trade dynamic remains a threat. A positive earnings tailwind going into the second quarter should help markets continue to climb the ‘Wall of Worry’.
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