Extreme outcome avoided
Investors have suffered serious whiplash over the past five weeks. After shaking the foundation of the global trading system on “Liberation Day”, as he termed the 2nd of April, US President Donald Trump has been backing down. The good news is that the most extreme scenarios are now much less likely. Recession risks have fallen and so has the possibility of a severe market response. The main reason is that the US and China agreed to a trade truce last week, putting most of the tit-for-tat import taxes on hold for 90 days. The bad news is that this is unlikely to be the end of Trump’s trade wars. More uncertainty and, probably, volatility lie ahead. But for now, we can all sleep a bit sounder.