By Summer Zhen and Dhara Ranasinghe
LONDON (Reuters) – As the dust settles after a bruising week eased by U.S. President Donald Trump’s tariff pause, the takeaway from global investors is loud and clear: market turbulence is here to stay.
In a stunning reversal on Wednesday, Trump said he would temporarily lower the hefty duties newly imposed on dozens of countries while further ramping up pressure on China.
A massive relief rally sent the S&P 500 stock index up nearly 10% in its biggest one-day jump since October 2008, while on Thursday Japanese stocks surged 9% and European shares were set for their best day since 2020.
Investors and analysts said de-risking from U.S. markets would likely continue with investors reducing exposure to Wall Street shares and increasing exposure to safe havens.
“The volatility is not over, the environment remains uncertain and some of the impacts are irreversible,” said Sat Duhra, a portfolio manager at Janus Henderson Investors in Singapore. “We have to get used to more back and forth on this issue and trying to trade it on such a short term basis is one for traders not for investors.”
UBS Global Wealth Management CIO Mark Haefele said the market rebound was an opportunity to position for a likely volatile period, especially given an escalation in trade tensions between the United States and China – the world’s two biggest economies.
And while Trump’s tariff pause has eased recession fears, banks said they still expected a sharp slowdown in economic growth with consumer and business sentiment likely to be hit by the uncertainty around trade levies.
“It seems very clear that the smooth long-term up-track for U.S. stocks is broken, and we are in a new era of heightened volatility and uncertainty,” said Guy Miller, chief markets strategist at Zurich Insurance Group, adding that he remained cautious.
Leading measures of stock and bond market volatility remain well above levels seen before Trump’s reciprocal tariff announcement last week.
And the safe-haven Swiss franc is up more than 5% against the dollar so far in April – set for its best month since late 2022.
“The level of shock was extreme, so we’ve seen more (client) money flowing to safer strategies, like money market funds, high-quality fixed income and private credit, over the last few weeks that are more uncorrelated to markets,” Samuel Rhee, chairman of Singapore-based wealth advisor Endowus, told a media briefing.
SHAKEN
Analysts and investors across the globe have pointed to this week’s sharp sell-off in U.S. Treasuries and weakness in the dollar as evidence that confidence in the world’s biggest economy has been shaken.
Deutsche Bank analysts said in a note before Trump’s announcement that the market had lost faith in U.S. assets.
“A lot of investors will have a lot of their clients’ equity exposure in the U.S.,” said Ian Lance, a portfolio manager at investment firm Redwheel in London.
“And some investors will be looking at whether they should be so exposed to the U.S., which still has high valuations, and then you have policy uncertainty and someone in charge that reverses policy.”
Lance said he had an underweight position in U.S. stocks in the global value strategy he manages.
U.S. and European stocks are now down around 7% this year and Chinese shares have fallen around 5%.
“I imagine some countries, China in particular, are watching (U.S. tariff policy) very closely and may accelerate their diversification away from U.S. assets,” Valerie Noel, head of trading at Swiss private bank Bank Syz, said before the tariff pause.
Some investors said expectations of more stimulus from Beijing should support Chinese shares, while others said U.S./China trade tensions would be closely watched for triggers of further market turbulence.
Trump increased tariffs on goods from China to 125% from the 104% level that kicked in on Wednesday.
“One thing that keeps me up at night is that a trade war could escalate into a financial war,” said Vasileios Gkionakis, senior economist and strategist at Aviva Investors in London.
China is the second-biggest foreign holder of U.S. government debt after Japan and the selloff in U.S. bonds this week has raised concerns that Beijing could offload its Treasury holdings, something that takes time to show up in official numbers.
(Reporting by Summer Zhen in Hong Kong and Dhara Ranasinghe in London, additional reporting by Ankur Banerjee; Editing by Kirsten Donovan)
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