Liberation Day 2.0 – What’s next for global markets?
The deadline for the 90-day pause in ‘Liberation Day’ tariff hikes moves closer as we approach the 9th of July, dubbed ‘Liberation Day 2.0’; investors and global markets are waiting for signs from the Trump administration. The quick de-escalation was to enable trade talks to move forward, but stability has been more elusive than perhaps the US had hoped. So far, the only confirmed deals have been with the UK and China, and the negotiations with other countries continue.
Since Liberation Day 1.0, the S&P 500 has rallied markedly, with a climb of over 20% from the recent lows. However, there are now concerns that the restoration of tariffs will threaten market stability. Analysts have warned of risks to equities, and ensuing volatility, especially if we see a more marked move towards deglobalisation and the ‘TACO’ trade gets cut short.
Another important area of concentration is bond markets. The US Treasury market witnessed significant volatility around the most recent round of tariff announcements, leading to a short-lived spike in yields and borrowing costs. With the US debt reaching more than $36 trillion, and the ‘Big Beautiful Bill’ potentially widening the deficit, the bond markets may be under further pressure, with more comprehensive and wider reaching ripple effects.
White House comments show that an extension is still possible, but recent statements by President Trump have created more ambiguity. Whether Trump follows his classical ‘the Art of the Deal’ playbook, or indeed goes with a more sanguine approach, volatility in markets is much more likely in the short and medium term.
We continue to actively monitor the global environment and stand ready to adjust portfolios if needed, rather than being passengers in passive indices with no option but to be taken along for the ride.
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