Global Markets Volatile as Trade War Pressures Persist

Global Markets Face Volatility as never before amid mounting uncertainty
and the continued impact of the trade war led by U.S. President Donald Trump.
The recent sharp swings across equities, bonds,
and commodities reflect investor anxiety and underscore the fragility of the global economic outlook.

Contents

Recovery in Asia

Intense Sell-Offs

Distressed U.S. Bonds
Conflicting Messages from Trump

Will Markets Rebound?

Volatility Index

Hedge Funds

The Fed in the Spotlight

Commodity Markets

Conclusion

Recovery in Asia After the Worst Historical Day

After recording their worst performance, Asian stocks rebounded, ending a sharp global downturn.
Japanese and Australian equities rose at the session’s open,
alongside U.S. and European stock futures.
In contrast, Hong Kong’s futures continued to signal further losses after
The U.S.-listed Chinese stock index dropped by more than 5%.

This drop came following Trump’s threat to impose an additional 50% tariff on Chinese imports,
contributing to the decline of the U.S. dollar against major currencies.

On the other hand, on Tuesday, Japanese stocks jumped over 6%
After Trump had assigned two administration members to begin bilateral trade talks with Japan
following a call with Prime Minister Shigeru Ishiba,
This was despite the continued implementation of 24% mutual tariffs and a 25% car duty.

Intense Sell-Offs in U.S. Markets

U.S. stocks experienced a massive wave of volatility.
Monday saw one of the most turbulent sessions, with the S&P 500 index moving by 7%
The most significant swing since 2020 during the COVID-19 pandemic.

Although the index has not officially entered bear market territory,
Investor reactions to tariff policies pushed traders to search for a “bottom” after trillions of dollars in equity value evaporated.

Distressed U.S. Bonds… and Rising Yields

In a highly volatile session, U.S. Treasury bonds dropped,
With yields rising across all maturities by at least 10 basis points
As investors liquidated positions to cover stock losses.
Australian and New Zealand bonds followed the same path.

The yield on 10-year U.S. Treasuries rose by 19 basis points. J.P. Morgan
analysts described this rapid shift as “confusing,” suggesting
that technical factors and low liquidity intensified the market movement.

Conflicting Messages from Trump Investors on Edge

Despite hints from Trump about potential negotiations,
He confirmed that he does not plan to backtrack on imposing additional tariffs on dozens of countries
Rajeev De Mello from Gamma Asset Management commented:
“Markets may have found a temporary bottom, but we have not yet reached stability.”

Several prominent Wall Street figures issued strong warnings.
Bill Ackman described the situation as an “economic nuclear winter,”
Boaz Weinstein said, “The collapse hasn’t truly started yet.”
And Jamie Dimon warned of “potentially catastrophic long-term consequences.”

Chris Larkin of E*Trade, a Morgan Stanley subsidiary,
stated that markets remain hostage to political headlines,
adding that periods of intense volatility often precede historic market bottoms.

Will Markets Rebound? Or Has the Worst Yet to Come?

Matt Maley from Miller Tabak predicted that a rebound would come,
but warned that the market repricing process based on economic realities would take time.
Max Kettner from HSBC pointed to the possibility of a temporary rebound that may benefit the “Magnificent Seven”:
Amazon, Alphabet, Nvidia, Apple, Meta, Microsoft, and Tesla.

Michael Wilson from Morgan Stanley emphasized that the S&P 500 index remains vulnerable to further decline amid escalating fears.

Volatility Index Remains High. Is the Fear Still Here?

Although the VIX volatility index (Cboe) has retreated from the 60-point level it reached earlier,
its futures curve continues to signal elevated volatility in the coming months,
reflecting ongoing investor anxiety.
So far, markets have not hit the extreme panic levels seen during major financial crises,
such as 85 points during the COVID-19 crash in 2020, 90 points amid the 2008 global economic crisis,
or 66 points during the yen liquidity crisis in August.
This relative decline in the VIX does not necessarily suggest that market risks have disappeared;
Instead, it may indicate that investors are holding back
and waiting for more precise signals on economic conditions and trade policy direction.

Hedge Funds Reposition Retail Investors Stay Out

According to Vincent Lin, Goldman Sachs reported a 22%
increase in hedge fund bets against U.S. assets last week—the highest in over a decade.
Richard Saperstein from Treasury Partners noted that “the absence of broad retail investor selling” remains a real threat.

Meanwhile, U.S. equity valuations dropped to their lowest levels since late 2023,
prompting many top analysts to cut their S&P 500 forecasts.
Dubravko Lakos-Bujas from J.P. Morgan cut his target from 6500 to 5200 points,
John Stoltzfus from Oppenheimer revised his forecast from 7100 to 5950 points,
Other institutions, such as Evercore ISI, Goldman Sachs, and Société Générale,
also issued similar downgrades, reflecting declining confidence in the market’s short-term outlook.

The Fed in the Spotlight Limited Options

With the uncertainty persisting, expectations are growing that the Federal Reserve
may move to cut interest rates to support the economy.
Solita Marcelli from UBS Wealth Management projected a rate cut ranging from 75 to 100 basis points,
With the S&P 500 potentially rebounding to 5800 by year-end.

Conversely, Michael Gapen from Morgan Stanley stressed that the Fed will remain
“in wait-and-see mode” unless clear signs of a recession appear.

Commodity Markets: Oil Rises, Gold Flat

Commodity markets showed mixed movements.
Oil prices rose after hitting a four-year low in the previous session,
while gold remained unchanged amid widespread caution.

Conclusion: Uncertain Future and Conditional Recovery

Global markets remain caught between sharp volatility and hopes of a rebound
With the trade war, pressure continues to be applied.
This situation is unlikely to change in the near term amid ongoing uncertainty surrounding global economic policy.

Trump’s trade war intensifies signs of slowing economic growth and fears of recession,
triggering repeated waves of volatility across equities, bonds, and commodities.

Despite some temporary positive rebounds,
especially in Asian markets and select U.S. stock sectors, economic fundamentals remain fragile.
Investors are cautious, hesitating to make long-term investment decisions
without clear signals about the future of tariffs and the Fed’s monetary stance.

A sustainable recovery depends on three critical factors.
First, the U.S. administration must de-escalate trade tensions,
which are significantly contributing to global market instability.
Second, key economic indicators must clearly improve to signal that the underlying fundamentals are strengthening.
Finally, central banks must intervene decisively through interest rate cuts to support growth and restore investor confidence.
Without progress on these fronts, market volatility is likely to persist.

Political shifts and economic data will continue driving the markets until key conditions are met,
while investors worldwide await clear signals to restore confidence gradually.

Global Markets Volatile as Trade War Pressures Persist

Global Markets Volatile as Trade War Pressures Persist

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