Markets are shaken once again – Nordea Markets

Markets are once again shaken by new tariffs and fears of a trade war, after Trump allegedly intends to impose 25% import duty on 60bn worth of imports from China, notes the research team at Nordea Markets.

Key Quotes

“Given how Trump has internalised the development in S&P500 during his presidential reign, we still judge that his appetite for further tariffs will be modest given how the markets react to the tariffs.”

“While the potential trade war is on everyone’s lips, the softening of the global macro momentum has kind of sneaked under the radar. The economic surprise index for the major economies continues to drop – which usually spills over to better relative bond performance versus equities. So, would the equity market have sold off even without Trumps tariffs? We tend to think so.”

“Usually, positive macro surprises are needed for the equity markets to outperform bond markets – and looking into Q2, we rather expect the opposite, as the surprise indices usually weaken seasonally in Q2. In particular in the US. This also implies that we expect a shaky risk appetite at best in Q2, while bonds should see some temporary tailwinds. It is though important to note that the 10yr treasury yield rarely drops below Fed Funds + 100bp, which implies that the new anchor for the 10yr yield is around 2.65%.”