U.S. stock markets opened sharply lower for a second consecutive day, as investor anxiety deepens over President Trump’s latest outburst in the escalating trade war. The President’s announcement of reciprocal tariffs — framed as a bold move to protect American wealth and industries — has instead triggered a fresh wave of volatility, with global markets on edge and Wall Street responding with a sharp sell-off.
Liberation Day has fast become Liquidation Day, as fears mount over a prolonged economic standoff with key trading partners, with analysts warning that the market reaction may only be the beginning of a broader reckoning. Our Chief Investment Officer, Jeff Brummette, provides a concise update following on from recent news.
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U.S. President Donald Trump wreaked havoc on global equity markets with his sweeping tariff announcements, with U.S. markets falling the most.
At the time of writing, the S&P 500 is down 12% from its 52-week high, the FTSE 100 has fallen around 9%, and the Euro Stoxx 50 is also down 12%. These drawdowns pale into insignificance, when you look at the tech-heavy NASDAQ 100, which is down c.17% from its 52-week high. These declines put us firmly in correction territory – defined as a drop of 10-20% from recent highs. Should losses exceed 20%, we would be entering bear market territory, typically characterised by longer, more gradual declines driven by negative fundamentals such as a recession. Markets are increasingly pricing in the risk of a global recession. Elevated valuations in the technology sector — especially among the so-called “Magnificent Seven” — have exacerbated the sell-off, as the AI-driven rally had pushed prices to levels vulnerable to any shift in growth sentiment.
Wisely, in our portfolios we have been underweighting exposure to the U.S. this year, in favour of Europe and China. We had concluded early in the quarter that Trump’s rhetoric on trade and tariffs was not consistent with promoting growth and that the enactment of tariffs would not sit well with a highly (perhaps over) valued equity market. In contrast, European and Chinese equity markets are cheap and both areas are taking steps to promote growth, not hinder it.
The odds of a recession in the U.S. appear to be growing as the indiscriminate firing of government employees by Trump’s Department of Government Efficiency (DOGE) is damaging consumer confidence. Price hikes, caused by Trump’s tariffs, will only make things worse. Should there be counter trade retaliation in response, risk to growth will rise further.
It is impossible to predict how this ends. Trump is convinced the U.S. has been treated unfairly by the rest of the world for decades. He stated that the tariffs will remain in place until he determines that the threat posed by the trade deficit and the underlying nonreciprocal treatment is satisfied, resolved or mitigated.
Inflation is still too high for central banks to come to the rescue with rate cuts, unless we see evidence of damage to the real economy. But were the damage to be realised the central banks have room to ease significantly.
We need to be prepared for continued volatility.
Given our portfolio positioning we did not make many changes in response to his tariff announcement. We have increased our fixed income duration to reflect the growing risk of a U.S. recession and continue to hold our gold exposure.
Trump’s promises of deregulation and lower taxes are now being replaced by indiscriminate firings of government employees, continued talk of unfair trade practices, and the need for imposition of tariffs on trade, in an attempt to ensure that the U.S. is treated fairly by its trading partners. Trump somehow believes that foreigners pay the tariffs rather than U.S. businesses and consumers. U.S. equity markets had already substantially underperformed the rest of the world over the first quarter of this year. This gap has widened significantly in the first few days of April.
He declared a national emergency — invoking the International Emergency Economic Powers Act (IEEPA) of 1977 — to justify the tariffs, stating that they will remain in effect until he determines that the threat posed by the trade deficit and the underlying nonreciprocal treatment is satisfied, resolved or mitigated.
It is impossible to guess how this will be resolved between the U.S. and its trading partners.
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Hear more from the Oakglen experts
Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which some of the investment management team have recently covered:
Read more:
- Liberation Day: Global Trade Tariffs Announced
Jeff Brummette, Chief Investment Officer
- April 2025 Investment Summary
Jeff Brummette, Chief Investment Officer
- The Global Automotive Sector: Losing Grip of the Wheel?
William Lamond, Investment Director
You can read other articles from the team on our News & Insights page.
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