Investment bankers Deutsche Bank have claimed that President Trump’s trade tariffs – and particularly the ongoing trade war with China – have halted growth in equities and cost the American markets trillions of Dollars in lost revenue.
In a note to clients, Deutsche Bank’s strategists highlighted the indirect impact of Trump’s bullish approach to negotiations, claiming that his behaviour has halted price appreciation for equities – a 12.5% annual rate that is worth approximately $5 trillion.
The 12.5% annual rate has been the average since 2009 across the S&P 500, but in the past year the S&P Index has gained less than 1% in value based on current valuation. Stock markets have been on a rollercoaster ride with interest in tech giants like Amazon and Facebook clashing with investor fears of lost trade from the ongoing tariff disputes. The S&P 500 reported a 5.33% drop in value last month.
The gold price hit a two-month high in Dollar terms today, peaking at $1,317 per ounce, but if discussions between the US and Mexico - the latest victims of Trump’s tariffs – don’t resolve tensions soon then there could be a sharp increase in price, with many more countries fearing America’s aggressive approach to brokering trade deals.
One reason that gold hasn’t rocketed up in price in US Dollar terms is the interest in US Treasury bonds – a rival safe haven asset. Bonds have been favourable of late, with a stock market upswing inviting a higher yield to tempt buyers to keep investing in the US Treasury. With demand for the bonds improving against the market instability however, the US Treasury’s need to offer improved yields is quickly fading. The lower the yields, the lower the demand for bonds – as has happened previously – paving the way for gold’s price to rise (tariffs depending).
The current forecast is that June will be the worst month for global equities since December 2018, while the likes of Morgan Stanley warn of the risk of recession if Trump starts to hit multiple economies with tariffs. With both the Chinese and American manufacturing sectors reporting weak performance and poor confidence, it’s hard to see a quick bounce-back from this latest thump to the global economy.