Global Risk Radar

US equities rise. US growth is supported by deregulation and improved business confidence, more than offsetting the impact of selective tariffs on Chinese and key European imports. Trade and geopolitical negotiations add to volatility for European and Chinese markets. The most expansionary US fiscal plans are shelved and inflation falls toward target. Bond yields fall slightly and central banks consistently cut interest rates toward neutral.

US equity markets surge on strong US growth and AI optimism, and inflation remains contained. A trade deal is reached and/or Chinese fiscal stimulus and stronger global demand are sufficient to support European and Asian markets, despite tariffs. Bond yields stay elevated on stronger longer-term growth and inflation expectations. Central banks gradually cut interest rates toward neutral.

Tariff schock

The imposition of large, blanket tariffs on US imports from multiple countries and retaliation from trading partners trigger higher US inflation, which, alongside a rising fiscal deficit, leads to higher bond yields. The disruption to global trade leads to lower US domestic demand and much weaker global economic growth. US and global equities decline.

Hard landing

US growth declines owing to weak consumer spending and deteriorating labor markets. Tariffs add to economic challenges for Europe and Asia. A weaker consumer more than offsets the inflationary impact of tariffs, and inflation falls, prompting central banks to cut rates. Global equities suffer double-digit losses, and credit spreads widen. Assets with safe-haven characteristics, including high-quality bonds, gold, the Swiss franc, and the yen, appreciate.