Sophia’s Thoughts On Persisting Trade Tensions
Global markets are under pressure from U.S. tariffs and investors are revising their forecasts. Is this the start of a broader risk-off shift?
These are Sophia's Thoughts:
Tariff-driven uncertainty is rattling global markets, sending equities down, safe haven assets up, and recession risk sharply higher.
Investors are bracing for slower growth and higher inflation, leading to a rotation into more defensive assets.
The crypto market has been tracking the broader market's movements, and remains in a sustained downtrend.
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🚀 Last week’s market performance
The crypto market sold off this week upon rising tariff concerns, ending the week down 7.3%. Bitcoin (BTC) followed the market but performed slightly better, closing down 5.7%. The best performing coin of the week was Zcash (ZEC), which gained 21.5%. The worst performing coin this week was Neo (NEO) which fell 35.3%.
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📉 What is Happening?
As Q2 kicks off, Wall Street is under pressure. President Donald Trump’s sweeping new tariffs, set to take effect on April 2nd, are already shaking investor confidence and startling global markets. Dubbed “Liberation Day” tariffs by his supporters, the measures target key imports like aluminum, steel, and automobiles, with the stated aim of reshaping U.S. trade relationships. But the rollout has been marked by uncertainty. “The comments leading up to this are still a lot of mixed messages and so the uncertainty level is still high, and nobody really knows what to expect,” said Thomas Martin, senior portfolio manager at Globalt Investments.
That uncertainty is hitting equities hard. The S&P 500 is down 4.1% (-5.8% in March) YTD, its worst Q1 since 2022, while the Nasdaq has dropped 10.4% (-10.5% in March), its weakest start since 2020. Markets have been in a downtrend with brief relief rallies along the way. Beneath the surface, the volatility reflects deeper anxieties. Economists warn the tariffs could be inflationary and stall economic growth. Goldman Sachs now puts the odds of a U.S. recession within the next year at 35%, up from 20%, citing the mounting risks tied to trade policy.
Globally, markets have reacted in a similar way. Japan’s Nikkei 225 tumbled more than 4% Monday and officially entered correction territory. Europe’s STOXX 600 fell 1.5%, and Germany’s DAX slid 1.3%. Meanwhile, gold surged to a record high of USD 3,150 per ounce, marking its best quarter since 1986 as investors rushed to safe havens. At the same time, the U.S. Dollar Index is down over 4% year-to-date, its worst start since 2016. “It’s already showing up in consumer confidence,” said Jeffrey Frankel, a professor at Harvard University, adding, “There is chaos and uncertainty around the tariff policy.” With global markets rattled and safe haven assets rising, investors appear to be repositioning for turbulence ahead.
⁉️ Why Does This Matter for Investors?
Trump’s tariffs aren’t just political headlines, they are actively reshaping market forecasts, consumer expectations, and investor risk models. The S&P 500 had its worst month since 2022 this March and the Nasdaq has officially entered correction territory. In response, Barclays slashed its S&P 500 year-end target from USD 6,600 to USD 5,900, citing weaker earnings outlooks under mounting tariff pressure. And it’s not just equities feeling the heat. Goldman Sachs now projects inflation rising to 3.5% in 2025, GDP slowing to 1%, and unemployment climbing to 4.5%.
At the same time, traders are recalibrating rate cut expectations in real time. As shown below, markets have pushed back the likelihood of a cut in May, but remain confident that cuts will begin by July or September.
Adding to the pressure, the impact of tariffs on the consumer could be significant. With a 25% tariff on all imported vehicles, car prices alone are projected to jump between USD 5,000 and USD 15,000 per vehicle, depending on the model. With inflation expectations rising and consumer sentiment hitting its lowest since 2022, investors are shifting toward safety. Gold is already up 10% in 2025 and 10-year Treasury yields have dropped to the low 4% range as capital moves into more defensive positions.
📍 Where Does This Leave Crypto?
Crypto hasn’t escaped the tariff turmoil. Bitcoin has been closely tracking the broader market sell-off, reflecting its correlation with traditional assets. It has struggled to hold above the USD 90,000 level over the past couple of weeks, while altcoins continue to lose dominance. Since tariff headlines began in March, the total crypto market cap has fallen over 15%, mirroring weakness in equities and broader market sentiment. Shown below, Bitcoin’s price has moved in tandem with the S&P 500 since the beginning of the year.
Yet even amid the turbulence, Bitcoin ETFs saw USD 196 million in net inflows last week, marking a second straight week of gains. These inflows do not outweigh the nearly USD 5bn that has left since mid February. As an analyst at Matrixport put it, “A meaningful pickup in Bitcoin ETF inflows appears unlikely in the near term.” Looking ahead, the question appears to be whether crypto can break free from broader market trends or stay stuck in the same risk-on, risk-off cycle. For now, volatility and caution appear to be in control.
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