08.04.25 - Take a breather
Markets are taking a breather after the wild ride during the last days. Tariffs remain the driving topic. The Chinese government has expressed a firm stance, stating it will "fight to the end" in the face of escalating trade tensions. The EU is trying to find a deal and proposed a "zero-for-zero" tariff agreement to eliminate tariffs on industrial goods. US President Trump has stated that for the EU, to receive relief from these tariffs, it must commit to purchasing USD 350 billion worth of American energy.
Markets: With US coming back to market today, the rebound started to gain some traction. The crypto rebound stalls, US dollar is loosing ground, Swiss franc is getting stronger, gold trading above USD 3’000/oz
My view: After making small adjustments to the portfolio allocation yesterday, I am now taking a wait-and-see approach before making any further changes. The situation remains uncertain until we gain a clearer understanding of the impact of tariffs on both the US and global economies. The probability of a recession is rising. JP Morgan currently addressed a 60% chance of recession in the US.
In the short term, it is crucial to observe how things unfold over the next few days, not just in terms of news flow but also investor behavior and technical indicators. Drawing from my professional experience, I have a solid understanding of institutional investment processes and timelines. Should they decide to adjust the positions of the portfolios of their clients, this is going to happen during the next days and will impact the markets as high volume is traded.
It is worth noting that institutions had previously advised twice their clients to buy the dip before the recent sharp sell-off. As a result, their current allocation may now be too high for the current environment of uncertainty and elevated volatility.
What concerns me, though, is the growing consensus. Many investors may use the recent rebound as an opportunity to offload positions and therefore we may be heading into a new downward leg in the market.
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