The past month was one of the most profound and dramatic in the history of capital markets. Yet, they are back to where they started. How is that possible?
April is now behind us, and the major sharemarket indices are just about back to where they started. That is remarkable, given the trauma of Donald Trump’s tariffs, which ushered in a new world of protectionism, de-dollarisation and an apparent desecration of financial market stability.
Still, the MSCI World Index is up half a per cent, while the monthly moves of US benchmark indices are modest and mixed. Meanwhile, the US government’s 10-year bond rate sits broadly unchanged at 4.17 per cent.
That begs the question: What is the source of the market’s optimism and is it well-founded? Should we really be paying post-‘liberation day’ prices to invest in a world that is far more turbulent and unpredictable?
“What everyone is trying to work out is whether this is a fundamental reshaping of the world order or not,” Citi’s head of research, Lucy Baldwin, said in an interview this week. “Our concern is that it is certainly an attempt to do so, but we will see what the midterm [US elections] show.”
The relief rally has been predicated on the hope that the Trump administration will be left with no choice but to walk back the tariffs that spooked the markets in the week after so-called ‘liberation day’.
Source: https://www.afr.com/companies/financial-services/the-real-worry-is-how-little-markets-have-changed-not-how-much-20250428-p5luwg