Navigating Tariff Volatility: Maintaining Perspective amid Heightened Uncertainty

The impact of recent trade policy changes will reverberate across the globe over time periods ranging from days to decades. While many longer-term implications are uncertain, some effects, such as the gradual rise in real yields on bonds and the secular pressure to increase defence spending, are already evident, allowing us to make informed longer-term portfolio adjustments.

Short-term disruptions and inflationary pressures

In the near term, tariffs are inherently disruptive and inflationary, although their inflationary impact will depend on companies’ perceived pricing power. Market sentiment, often swayed by headlines rather than fundamental deterioration, has fluctuated drastically. The current volatility reflects heightened uncertainty about the future, rather than a definitive economic downturn. Over the next few quarters, we anticipate a combination of slower earnings or GDP growth and higher inflation; however, a technical recession is not necessarily imminent. To navigate short-term noise requires us to lean a bit more heavily on our sentiment and volatility dashboards.

Magnitude of tariff announcements

So far, the magnitude of the announced tariffs has exceeded both our and the market’s expectations. We no longer believe that these aggressive interventions are mere negotiation tools but rather a more permanent feature of the US’s economic stance, influenced by long-standing ideological beliefs. 

Read full article: https://stanlib.com/2025/04/11/navigating-tariff-volatility-maintaining-perspective-amid-heightened-uncertainty/

April 12 2025 By Marius Oberholzer - Stanlib