Market developments
Equities: This week, global equity markets experienced significant turmoil, primarily driven by U.S. President Donald Trump’s announcement of sweeping tariffs ranging from 10% to 50% on all trading partners, leading to a sharp sell-off. The Dow Jones Industrial Average plunged nearly 3000 points, with the S&P 500 and Nasdaq suffering their worst week since 2020 and are down over 13% and 19% YTD respectively. Canada, Europe and Japan didn’t fair much better, as they all moved meaningfully lower this week. Investors, fearing a trade war and potential recession, shifted away from stocks, with companies like Nike and Apple among the hardest hit, though Trump claimed the U.S. economy would ultimately benefit.
Fixed Income: Fixed income markets saw a surge in demand for safe-haven assets as bonds rallied amid the equity rout. Yields on U.S. 10-year Treasuries dropped as prices rose. The markets now anticipate four Federal Reserve rate cuts in 2025, up from two or three expected previously, to counter economic slowdown risks from the tariffs. European bonds faced mixed pressures, with PIMCO suggesting a shift toward high quality global fixed income could outperform equities in the coming years as fiscal expansion in Europe might reduce bond appeal.
Commodities: Commodities took a steep hit this week, reflecting concerns over weakening global demand due to the escalating trade war. Oil prices dropped 7%, hitting a four-year low, while metals, copper, and agricultural products also declined sharply as industrial activity fears mounted. Gold, however, bucked the trend and pulled back slightly from a record high of $3,167.57, outperforming other commodities as investors sought safety amid the uncertainty.