Analysis: Tariff Threat Poses Risk to High-priced Stocks and Bonds

Global markets are uncertain about the impact of U.S. tariffs on growth, leading to potential steep corrections in either stocks or bonds. Trump’s trade policy volatility has left markets wary. Canada faces a 35% duty, but the broader markets are unfazed. Investors are cautious in a late-stage bull market.

Stocks and cryptocurrencies are flourishing, with Wall Street hitting record highs. Interest rate cuts and AI enthusiasm fuel optimism. On the flip side, government bonds, gold, and oil reflect concern over potential economic derailment from tariffs.

Amidst uncertainty, investors are diverting cash to European stocks, gold, and emerging market currencies. Fed Chair Powell’s anticipated rate cuts are in limbo as strong job creation clashes with weakening business activity. Trump’s tax cut will add $3.3 trillion to the deficit.

U.S. Treasuries are retreating, focusing on falling growth. Bonds anticipate lower growth and rate cuts due to the trade war. Gold rallies as a hedge against uncertainty, while the dollar struggles. Equities remain emboldened by absent inflation from tariffs, but experts expect a shift.

French asset manager Kevin Thozet hedges against a U.S. stock market fall but sees retail traders boosting market dips. Trump’s tax cuts may counter tariffs’ impact. However, increased debt could push the 10-year Treasury yield to 5%, posing risks to households, companies, and the government.

Read more at Yahoo Finance: Analysis-High-priced stocks and bonds raise tariff threat for markets