Commenting on post-tariff developments, Altaf Kassam, Europe Head of Investment Strategy & Research, State Street Global Advisors, said:

“In the US equity market, valuations have started approaching recent historical norms, and as negative momentum continues this could present buying opportunities, as the case could be made that the market is approaching oversold conditions. In fact, the April 9th rally aside, prior flows suggest some opportunistic buying has already occurred in US Technology and Mid-Caps over the past few trading days. That said, the upcoming earnings season might provide a “wake up call” on the nascent effect of tariff uncertainty on consumer and corporate consumption.

Outside the US, markets such as Europe and APAC will eventually have to digest the damaging nature of the trade war – The cyclical nature of European equities has proved defensive so far YTD, but as the probability for a global recession gets revised higher, consumer driven sectors, such as Financials, Discretionary and Energy should also suffer the steepest downward earnings revisions.

Within APAC, notwithstanding the recently announced delays on certain classes of electronics, President Trump’s tariffs will present challenges for these economies to survive with reduced demand. Given China’s approach of raising the stakes through the sale of US Treasuries and pointed measures to threaten the Trump Administration’s pro-growth agenda, Asian equity markets are starting to reflect the realization that China and the US could be in a more protracted standoff, which would be bad for the region. 

Although the market is currently more focussed on negative growth shocks, the fear of inflation should see continued demand for gold, including from Central Banks as well as investors – ETF Inflows into the shiny metal breached over $1.1 (B) USD on April 9th alone. 

The reality of the current macro environment is unknown for now and will likely take many months to figure out. For those with a strategic approach, the market may present a buying opportunity, while rebalancing the portfolio at cheaper valuations. For those taking a more dynamic approach, a defensive posture could preserve capital and allow the accumulation of dry powder to take advantage of further dislocation.”

For further insights, please see Volatility Positioning: How to Hold on for the Ride.