Kevin Thozet, an investment committee member at Carmignac in Paris, expressed concern that the current situation may exceed what investors had anticipated. The impact of the escalating trade tensions initiated by Trump could significantly affect economic growth in Europe, potentially erasing a substantial portion of the projected growth for 2025.
The current trade war poses a threat to the euro-area expansion projected by the European Central Bank for this year and the next. Stocks and bond yields are experiencing a high level of correlation, indicating a downgrade in economic growth expectations. Unlike in previous years, where both stocks and bond yields were rising, this time they are falling, signaling a pessimistic outlook.
The imposition of tariffs and the uncertainty surrounding global trade have dampened the positive market sentiment that propelled European stocks earlier in the year. European banks and industrial shares, especially those with significant exposure to US exports, were among the worst affected by the recent market fluctuations.
Market experts such as Nicolas Forest from Candriam and others are cautious about the current trading environment and are considering adjustments to their investment strategies. The Stoxx Europe 600 Index showed a significant decline, reflecting the overall negative sentiment across regional bourses.
US tariffs have triggered a domino effect, leading to market downturns worldwide, including in Japan. Market analysts predict adverse effects on economic growth and inflation if the tariffs persist.
Despite the uncertainties, some investors see potential opportunities in European markets amid the turmoil. However, others emphasize the need for caution and recommend diversifying portfolios with safe assets like Treasury bonds and gold.
The macroeconomic impact of the tariffs on various industries remains uncertain, with ongoing negotiations expected to determine the ultimate outcome. Investors are advised to closely monitor market developments and exercise prudence in their decision-making process.