14.07.25 - Relaxed investors despite latest tariff letters

The White House has issued fresh tariff letters during weekend, announcing 30% duties on exports from the EU and Mexico, effective August 1,  2025, adding to earlier measures on other countries.
In response, the EU has postponed retaliatory tariffs on EUR 21 billion of US goods to maintain negotiation leverage, while preparing a wider package as a countermeasure.

Markets: European equities slightly down - US indices trading sideways with long-term yields almost unchanged as well as the US dollar - gold giving up earlier gains - Bitcoin reaches new all-time high with USD 123’200

My view: Markets are brushing off tariff risks, for now. Despite the seriousness of the tariff moves, investors are maintaining a surprisingly relaxed stance, assuming Trump will soften again (TACO: Trump Always Chickens Out). But the tariff train has left the station, and the damage may not be visible immediately. Companies are on hold with new investments since some month with all uncertainties around the tariff topic.

All these measures come during a period of already stretched valuations and reaching a euphoric sentiment. I see asymmetrical risks ahead: limited upside from here, while the downside, if tariffs are enforced or retaliated, could be sharp. I remain cautious, keeping hedges in place and stops tight. Market calm may be deceptive.

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