Displaying items by tag: tariffs

Tariff-related market volatility in 2025 highlighted the stabilizing role of fixed income, as broad bond indexes delivered 4% to 7.25% returns in the first half of the year, largely from higher coupon income. The April tariff announcement initially triggered a sharp sell-off in risk assets, but bonds held steady, underscoring their resilience compared to equities. 

While the most extreme tariff scenarios have been avoided, a projected U.S. weighted average tariff rate of around 12% is still expected to influence inflation, growth, and interest rate paths. Higher yields now provide a stronger income cushion than in prior years, reducing the downside impact of rising rates and enhancing potential returns if rates fall. 

Active fixed income ETFs can be especially well-suited for this environment, as managers can tactically adjust duration, credit quality, and global exposure to navigate tariff-driven market shifts. Investors are finding opportunities in high-quality bonds and global fixed income as hedges against policy-driven uncertainty.

Finsum: Tariffs remain a key macroeconomic variable shaping strategy, even in a more moderate form than initially proposed.

Gold futures spiked sharply above spot prices after reports suggested the U.S. would impose unexpected tariffs on 1 kg and 100 oz bars, a major disruption for Switzerland, the global refining hub. 

These bar sizes are central to U.S. trading, and the sudden policy shift triggered short-covering and a widening of the exchange-for-physical (EFP) spread, echoing past dislocations during COVID and earlier tariff fears. The turmoil has raised doubts about the reliability of New York futures markets for price discovery, as policy volatility increasingly distorts trading signals. 

Meanwhile, the December gold contract hit a record $3,534, but analysts caution that spot prices, not futures, reflect gold’s real value. A similar drama unfolded in copper markets, where a tariff scare caused prices to soar—only to collapse when Trump reversed course. 

Finssum: Heavy trader losses, bloated U.S. inventories, and mounting questions about the integrity of U.S. commodity pricing amid tariff uncertainty are the result.

U.S. stocks ended mostly flat after the Federal Reserve held interest rates steady and signaled slower future cuts, while geopolitical tensions between Israel and Iran pushed oil prices higher. 

Fed Chair Jerome Powell emphasized that future rate decisions will remain data-dependent and warned of rising consumer prices this summer due to Trump’s new tariffs. Despite earlier gains, markets lost momentum following the Fed’s cautious tone; the Dow slipped 0.10%, the S&P 500 dipped 0.03%, and the Nasdaq edged up 0.13%. 

Meanwhile, Brent and WTI crude rose slightly amid fears of broader Middle East conflict and supply disruptions. U.S. Treasury yields, initially lower on safe-haven demand, rebounded after Powell’s comments on inflation. 

Finsum: Economic data added to uncertainty, with retail sales declining sharply in May and jobless claims suggesting weakening labor market momentum.

Despite the sharp market sell-off, financial advisors say the downturn could present timely tax planning opportunities. Tax-loss harvesting—selling underperforming assets to offset capital gains or reduce taxable income—has become a key strategy as investors navigate recent volatility. 

Certified financial planner Sean Lovison emphasizes this as a way to find a “silver lining” amid losses, especially since excess losses can be carried forward into future tax years. Roth IRA conversions are also gaining attention; converting traditional IRA funds during a dip allows for potential tax-free growth once markets rebound, though timing and tax implications must be carefully considered. 

Additionally, the window to contribute to a Roth IRA for 2024 remains open until April 15, offering a chance to buy in at lower asset prices while securing future tax-free retirement growth. 

While losses sting, this environment may reward those who act decisively on smart financial strategies.

Morgan Stanley has revised its U.S. economic outlook, predicting weaker growth and higher inflation due to escalating trade policies. The bank now expects GDP growth of 1.5% in 2025 and 1.2% in 2026, lowering its prior estimates of 1.9% and 1.3%, respectively.

Inflation forecasts have also risen, with headline PCE inflation projected at 2.5% by December, up from 2.3%, while core inflation is seen hitting 2.7% instead of 2.5%. Despite fluctuating trade policies with key partners, tariffs on Chinese imports remain in place, with China vowing retaliation.

These adjustments follow President Trump’s temporary suspension of tariffs on Canada and Mexico, reversing an earlier move to impose duties over concerns about drug trafficking and migration.

Finsum: Restrictive trade and immigration policies could weigh on economic growth, reinforcing their view of "slower growth, firmer inflation."