Investors are adapting to a volatile trade environment three months after President Donald Trump’s global tariffs rocked markets, leading to a dramatic plunge and subsequent rebound. According to Reuters, the shifting trade policies have prompted investors to brace for surprises and adjust strategies to withstand sudden policy shifts.
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Michael Reynolds, vice president of investment strategy at Glenmede, emphasized the importance of considering trade policy alongside fiscal and monetary policies when evaluating economic impacts. The recent delay in tariffs to August 1, impacting 14 nations with levies ranging from 25% to 40%, highlights the unpredictability of the current administration’s approach.
The S&P 500, which experienced significant volatility following Trump’s “Liberation Day” announcement, has since recovered, hitting a record high on June 27. The index is up approximately 6% for the year, buoyed by a strong first-quarter earnings season and favorable economic data. However, Kristina Hooper, chief market strategist at Man Group, cautioned that the market might not fully account for the negative earnings impact of existing tariffs, and optimism about future trade deals could be premature.
In response to the uncertain trade landscape, some investors have adjusted their strategies. Janus Henderson Investors, for example, has reduced holdings in sectors vulnerable to tariffs, such as Japanese and European automakers, while favoring service companies less affected by trade tensions.
Despite the stock market’s rebound, the U.S. dollar has weakened, dropping about 6% against major currencies since “Liberation Day.” Meanwhile, gold has benefited from its status as a safe-haven asset, climbing 6% since April 2 and 26% for the year.
