Nowhere to hide: Markets roil as tariff turmoil escalates
Global investors were given little reprieve last week as markets swung wildly in response to geopolitical developments, inflation reports and mounting uncertainty around U.S. economic policy. From equities to bonds, the usual hedges failed to provide shelter — leaving investors grasping for stability in an environment increasingly shaped by policy unpredictability rather than fundamentals.
Chief Investment Officer Thierry Hasse
Equities Bounce — But Volatility Reigns
U.S. equity markets ended the week with gains, but the path there was anything but smooth. After a sharp selloff triggered by the U.S. administration’s announcement of “reciprocal tariffs” on April 2, stocks staged a dramatic rebound. On Wednesday, April 8, the S&P 500 surged 7% in just eight minutes — its strongest single-day gain since 2008 — following news that the White House would implement a 90-day pause before the new tariffs take effect.
However, the reprieve was selective. The moratorium applies to all trading partners except China. Chinese exports to the U.S. will continue to face a 145% tariff on all goods. With China retaliating in kind and refusing to enter trade negotiations, the trade war between the world’s two largest economies is escalating with no resolution in sight.
This unpredictable cadence — where major economic decisions are introduced, revised or reversed within days — has become a defining feature of the current market landscape. Investors are reacting less to economic data and more to policy pivots that defy conventional forecasting.
Bonds Break Down
Historically, investors have turned to U.S. Treasury bonds for stability during periods of equity market stress. Not this time.
Last week, Treasury yields experienced a significant increase, with the 10-year note rising by 50 basis points to 4.5%, leading to a decrease in bond prices. This development has called into question the traditional view of long-term Treasuries as a safe haven during periods of market volatility. The current tariff environment appears to be affecting foreign countries’ willingness to hold U.S. assets, as the unpredictability of economic policy fosters increased caution among global investors.
Countries with substantial trade surpluses with the United States — such as China and Japan — are typically among the largest holders of U.S. Treasuries. These holdings form a key part of their foreign exchange reserves and help manage the value of their currencies relative to the dollar. However, with ongoing tariff tensions and mounting policy uncertainty, these nations may begin to reassess their exposure to U.S. debt. Such a shift could exert sustained pressure on long-term Treasuries and drive yields higher.
In the current environment, we find shorter-maturity bonds more attractive due to their reduced interest rate sensitivity and flexibility amid uncertainty. Our Investment Committee will be monitoring these dynamics closely.
Inflation Cools — But Not Enough to Move the Fed
On the surface, inflation data offered a rare bright spot. The Bureau of Labor Statistics reported the first month-over-month decline in the Consumer Price Index (CPI) in five years, with annual inflation slowing to 2.4%. Producer prices also fell unexpectedly, led by a 4% drop in energy costs.
In more stable times, this news would have cheered equity and bond investors alike. But in today’s environment, these figures were largely dismissed as backward-looking. Most market participants expect that tariff-driven costs will eventually be passed along to consumers — potentially reigniting inflationary pressure just as the Federal Reserve had been gaining traction in its inflation fight.
As a result, the Fed remains on hold. Officials, like many investors, find themselves constrained by policy instability rather than macroeconomic fundamentals.
What We’re Watching This Week
Equity futures opened Sunday evening with a rally — particularly in tech-related stocks — but that early optimism is already being tested. A late Friday announcement temporarily exempted smartphones, computers and semiconductors from the latest tariff list. However, both the commerce secretary and the president have since clarified that these exemptions are temporary, designed to give businesses and consumers time to adjust, not to signal a permanent shift in policy.
That distinction matters.
Markets are now recalibrating. The initial relief in futures is beginning to fade as investors come to terms with the reality that this is merely a pause, not a pivot. The familiar pattern of surprise announcements followed by reversals continues to drive uncertainty and challenge traditional portfolio hedging strategies.
Meanwhile, more than 30 companies are set to report earnings this week. Investors will be attentive not only to quarterly results but also to forward guidance. What CEOs say — or don’t say — about pricing pressure, supply chain resilience and global demand will provide valuable insights into how businesses are navigating this volatile environment.
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