Final Thoughts
Tariffs and war push markets in opposite directions, and both factors apply significant downward pressure on the world economy. Tariffs have already begun to slow trade. They have weakened European-based export-oriented industries and are likely to create long term negative impacts on the rate of overall growth for the global economy.
Simultaneously, the ceasefire story has improved investor sentiment and reduced the near-term pressure from the rising energy prices. That contributed to an improvement in equity performance and a reduction in the likelihood of short term inflationary pressures. This is creating an environment where the surface level of the market appears to be relatively stable. However, there exist considerable underlying economic risks.
For investors, this means the next market movement will be determined by which of these two factors is stronger. If stability in the Middle East continues, then stocks should remain supported, currency pressures are likely to ease and oil prices will likely remain contained.
However, in case of the collapse of the ceasefire again, volatility may soon return. All currencies in that context, including the U.S. dollar, EURUSD, USDCHF, equities, and industrial metals, will respond following the same larger theme: growth pressure on one side and changing risk sentiment on the other.