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What do Trump’s tariffs mean for markets?
President Trump’s “Liberation Day” tariff announcements were harsher than expected, but he also announced a 90-day pause on “reciprocal” tariffs and offered some reprieve for tech products. We believe the risk of a more severe economic downturn is now more limited, and upgrade US equities to Attractive.
Investment view
A range of key tech products such as smartphones, personal computers, memory chips, and servers are temporarily exempted from the US tariffs, although US President Donald Trump downplayed the exemption as a procedural step. He said that semiconductors and the whole electronic supply chain remain a target of his overall tariffs.
New in recent weeks
A range of key tech products such as smartphones, personal computers, memory chips, and servers are temporarily exempted from the US tariffs, although US President Donald Trump downplayed the exemption as a procedural step. He said that semiconductors and the whole electronic supply chain remain a target of his overall tariffs.
The S&P 500 fell nearly 11% in the two trading days since Trump's announcements on reciprocal tariffs. China said it would retaliate with 34%tariffs on imports from the US, while Federal Reserve Chair Jerome Powell took a cautious approach to interest rate cuts.
US President Donald Trump ordered a 25% tariff imposed on all imported passenger vehicles and light trucks, effective 3 April. This will be expanded to include key auto parts (including engines, transmissions, electrical components and more) no later than 3 May.
Did you know?
High volatility has historically been followed by higher-than-normal returns. While each case is different, levels of the VIX above 40 have historically been followed on average by 30%one-year returns on the S&P 500, with a 95%chance of a gain.- One way to mitigate market entry risks is by using a phasing-in strategy. Since 1945, phasing into a balanced 60/40 portfolio over 12 months has outperformed cash in approximately 74% of one-year periods and 83% of three-year periods. When initiated after a market decline of over 10%, this strategy outperformed cash in 82% of one-year periods and 94% of three-year periods.
- Analyzing the 12 occasions when the S&P 500 has fallen by 20% from its peak since 1945, the index has delivered a positive subsequent one-year return on 67% of occasions, with a mean return of 12.9%. Over a three-year horizon, this rises to 91% of occasions with a mean return of 29.2%.
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