U.S. stock indices experienced notable volatility amidst the escalating trade war led by the U.S. administration with major trading partners, with no real signs of de-escalation. This escalation prompted investors to avoid risk after limited gains that lasted for two days.
These fluctuations occurred despite strong financial results from major Wall Street institutions during yesterday’s session, showing improved stock trading and relative stability in consumer and business conditions. Although the S&P 500 index rose about 1% at the start of the session, it ended the day lower, reflecting the cautious mood dominating the markets.
In related news, U.S. bond prices rose following remarks from a Treasury official who suggested that a legal adjustment was under study to reduce trading costs imposed on banks, temporarily calming the market.
On the trade policy front, the U.S. president renewed his call for China to resume negotiations, signaling that the end of tariff tensions is still far off, especially with the continued escalatory measures from both sides. Meanwhile, talks between the U.S. and the European Union failed to make significant progress, deepening the uncertainty surrounding the future of global trade relations.
In light of this situation, economic experts warned against rushing to make definitive judgments about the impact of trade tensions on the economy, emphasizing the need for investors to prepare for various potential scenarios, ranging from growth slowdown to an actual recession that could affect corporate profits and financial markets.
On another note, a Bank of America survey revealed that pessimism about economic forecasts has reached its highest level in nearly 30 years. However, the asset allocation by fund managers does not fully reflect this pessimism, indicating that market pressures may continue in the coming period.
Experts in an analytical note also pointed out that extreme fear has not yet been reflected in cash liquidity levels, meaning that the markets may experience further volatility before reaching stability or recovery.
