In a return to regularly scheduled programming, trade tariffs and the associated renewal of commitments to negotiation deadlines remain one of, if not the largest, determining factors in US equity performance.
Recently offered a period of comparative respite, the Dow Jones has proven particularly vulnerable to trade-related news in recent memory, especially compared to tech-led US indices like the Nasdaq-100.
For now, the $1,000,000 question remains whether Trump will remain firm with his new deadline. Naturally, much of the success of Trump’s current strong-arm tactics on trade will be determined by whether other nations believe this will be their last chance to strike a deal, or whether ongoing negotiations will allow for an extension in the deadline, not for the first time.
At the time of writing, the EU and Mexico are the latest to be caught in Trump’s crosshairs. On Saturday, Trump announced that a 30% tariff would be imposed if an agreement isn’t reached before August 1st.
With the so-called ‘Liberation Day’ sell-off still fresh in the collective mind, Trump will need to carefully navigate the next twenty days or risk inviting downside to otherwise buoyant stock market.
The markets remain primarily concerned about how tariffs could affect inflation and, therefore, the Federal Reserve’s monetary policy decisions, alongside how changes in trade relations will affect economic performance.
If put in one word, any increase in market uncertainty will harm risk appetite, which will likely bode poorly for US equities and other risk-on markets.