Stock market volatility returns amid more zigs and zags in U.S. trade war
Is it safe to venture back in the equity market waters as we begin the summer season?
A Negative Week for U.S. Stock Markets
Chief Investment Officer Thierry Hasse
The comments should remind investors that risk assets remain susceptible to sharp episodes of volatility following negative news on trade negotiation. Investors would do well by never believing that any trade war de-escalation is permanent. The current administration is set on attempting to correct decades of trade imbalances through tariffs and executive orders. We expect trade tensions will constantly flare up during the duration of the second Trump term.
The Revolt of the Long Bond
The U.S. Treasury yield curve finished the week with nice round levels: 4% for 2-Year Notes, 4.5% for 10-Year Notes, and 5% for 30-Year Bonds. While yields in the short-term maturities have been relatively stable, yields on the 30-year Treasury bonds have moved sharply higher this month. After a poor auction of 20-Year bonds on Tuesday, yields briefly touched 5.15% – the highest in almost two decades (Source: CNBC). Fixed income market participants are demanding higher yields to compensate for the ever-increasing U.S. government spending deficits. The selling in long-dated Treasury securities also increased after Congress passed the “Big Beautiful Bill” that will add trillions of additional dollars to the U.S. national debt.
Apple in the Crosshairs
During the 1960s, what was “good for GM was good for America.” In more recent years, Apple became a symbol of U.S. technological prowess – and what was “good for Apple was good for America.”
Well, this is no longer the case: Apple became the first company to be specifically targeted during the administration’s tariff rollout. What is more concerning is that producing iPhones at scale in the U.S. is simply not possible. Assuming Apple could find the required skilled workforce, it would take five to 10 years to open U.S. factories, according to most Wall Street analysts. One wonders how Apple CEO Tim Cook will respond.
More Zigzag Tariff Headlines
After “a very nice phone call” with European Union President Ursula Von der Leyen on Sunday, President Donald J. Trump said he would extend the deadline for the imposition of 50% tariffs on the EU to July 9. Von der Leyen said Europe is ready “to advance talks swiftly and decisively.” U.S. stock markets opened higher Tuesday morning, erasing most of the losses recorded on Friday before the long weekend. The clear lesson here: Volatility around trade negotiations has indeed returned.
What We’re Watching This Week
This week investors will be awaiting the quarterly earnings reports of Nvidia and Salesforce after the closing bell on Wednesday. Can the artificial intelligence revolution continue to propel U.S. equity markets higher?
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