31/03/2025
Trade Tensions, Recession Risks, and Central Bank Policy Uncertainty
Global financial markets remain under pressure as investors brace for U.S. President Donald Trump’s anticipated tariff announcements on April 2. Equities have tumbled, with the S&P 500 on track for its worst quarter since 2022, shedding approximately $5 trillion in value since late February. U.S. stock futures indicate further losses, with S&P 500 and Nasdaq 100 futures down 0.9% and 1.3%, respectively. European and Asian markets have also declined sharply, with Japan’s Nikkei 225 falling 4% and Europe’s Stoxx 600 down 1.7%. Sectors most exposed to trade—mining, banks, and autos—have been hit hardest.
Concerns over the economic impact of tariffs have driven a flight to safe-haven assets. Gold reached a record high of $3,147.97 per ounce, up 20.8% year-to-date. Treasury yields have declined, with 10-year U.S. rates falling below 4.2% amid rising expectations that trade disruptions will force the Federal Reserve and European Central Bank to cut rates. Goldman Sachs now forecasts three rate cuts from both central banks this year.
The scope of Trump’s tariff plans remains uncertain, with reports suggesting he may impose broad new duties on major trading partners. A flat 20% tariff on countries with which the U.S. has a trade deficit is under consideration, alongside additional levies on steel, aluminum, and autos. The potential economic fallout is significant, with Bloomberg Economics projecting a 4% hit to U.S. GDP over two to three years and a 2.5% increase in prices. The risk of stagflation is rising, as consumer spending has slowed while inflation expectations have surged to their highest level in over two years.
The global oil market has also been affected by trade concerns. Brent crude initially rose on fears of secondary sanctions on Russian oil but remains on track for a quarterly decline as economic slowdown fears weigh on demand. Meanwhile, OPEC+ is set to begin monthly production increases in April.
Geopolitically, tensions have escalated, with Trump threatening 25-50% secondary tariffs on Russian oil buyers in response to President Vladimir Putin’s stance on Ukraine. His evolving approach to Russia has unsettled European leaders, raising concerns about potential shifts in U.S. foreign policy commitments.
Markets are on course for their worst quarter since 2022 (with the big corporate scandals after the dotcom bubble). But one thing to notice is that every very bad quarter was followed by a considerable overperformance. So, an opportunist and contrarian may start to wait for a possible turning point by Trump or some mild rhetoric after the tariff threats & bullying , which may result in a bullish run at least for the short term! But keep in mind that bad things happen gradually (like now) and then suddenly!
In the near term, markets remain focused on Trump’s April 2 announcement and upcoming economic data releases. Investors are weighing whether trade actions will further disrupt global growth and central bank policy responses. The combination of slowing growth, rising inflation risks, and policy uncertainty continues to drive volatility across asset classes.
IMPORTANT DISCLAIMER
The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.
