The tariff shock has settled – what’s next?

The markets recovered surprisingly quickly from the stock market slump at the beginning of April. However, the unpredictable US trade policy and its geopolitical and economic effects remain a negative factor. The short-term uncertainties continue to be offset by solid fundamental data. Whereas a month ago we mainly saw upside potential and advised targeted purchases, the risk/reward ratio now appears more balanced following the recent recovery. This does not change our main recommendation: ignore political headlines, remain calm and stay invested.

Losses made up

Around a month after Trump’s tariff announcements, the stock markets have recovered impressively from their short-term shock. This is not only reflected in the complete return of share prices. The VIX index – a measure of market uncertainty – has also normalized from extreme values of over 50 to a much more moderate level of around 25.

Source: Asset Management Tareno

Panic is a bad advisor

On April 8, we recommended remaining calm, staying invested and using the correction as a buying opportunity. We assumed that the tariff threats would weaken and that the economic damage would be limited. In this scenario, we saw attractive upside potential for equities. At least from a one-month perspective, this assessment paid off: it was worth holding our nerve and buying selectively.

Source: Asset Management Tareno

A Topic with continuation

However, the issue of trade policy and tariffs is not yet off the table. Uncertainty about the US government’s course and its economic consequences remains high. Although Trump has put some of his most aggressive plans on hold for the time being under pressure from the markets, his agenda remains difficult to predict. It is now clear that tariffs will remain significantly higher, especially against China. This will not only weigh on economic growth, but is also likely to fuel inflation in the US again.

Source: Asset Management Tareno

Support from fiscal or monetary policy is unlikely in the short term: the US government is in the midst of an austerity program, while the Federal Reserve is likely to hold off on cutting interest rates for the time being in view of the inflation risks. As soon as the economic burdens caused by the chaotic trade policy become more apparent in the coming months, volatility on the markets could increase again – and investors’ risk tolerance could be put to the test once more.

Opportunities and risks in balance

Following the rapid recovery of the markets in April, the hurdles for further price increases have become higher in the short term, while visibility remains low. At the same time, however, important fundamentals remain intact: Interest rate cuts, productivity advances through the use of AI and moderate valuations speak for attractive equity returns in the medium to long term.

Although the overall assessment is less favorable than in the previous month, the overall picture is still positive. Our main recommendation remains unchanged: Keep a cool head and stay invested – especially in politically turbulent times.

Source: Asset Management Tareno

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Images / graphics: The graphics were produced by Tareno AG from public market data.