Tariffs U-turn, market U-turn

The art of policymaking is a lot about setting expectations against which all future decisions are assessed. When President Trump famously introduced his extreme tariffs on ‘Liberation Day,’ markets were obviously concerned. Since then, resilience in US labour markets, better-than-expected earnings, and trade war de-escalation have boosted sentiment. Risk assets have rebounded, and bond yields risen.

Whether this upside on risk assets is sustained depends on economic performance and clarity on trade policies. For bonds, pressure on the long end of the curve will remain due to fiscal issues/high debt notably in the US (not least because of Trump’s tax bill) and Japan. For the time being, we upgrade our growth projections for the US, Eurozone, and China, and downgraded US CPI projections, owing to a milder-than-expected shock from tariffs. 

However, the picture seems more complex than markets are indicating.

Image
Monica Defend

Monica Defend

Head of Amundi Investment Institute

Global policymaking is becoming increasingly nuanced. While the Fed will need to consider inflation expectations before cutting rates, the ECB is in a slightly better position, whereas the BOJ is likely to hike rates.

Monica Defend, Head of Amundi Investment Institute

Continue reading the full document

Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 4 June 2025. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
 

Date of first use: 4 June 2025

Doc ID: 4569557