15.10.25 - Tit-for-tat trade war saga
Tensions between the US and China escalated once again after President Trump threatened a cooking oil embargo in response to Beijing’s refusal to purchase US soybeans. This latest move adds fuel to the already heated trade rhetoric seen in recent weeks, following China’s decision to limit rare earth exports, a critical resource for many US industries.
The tit-for-tat measures mark a clear re-emergence of the trade war narrative that had been dormant for some time. While global trade data had recently shown some improving signs, political tensions are once again clouding the outlook for cross-border supply chains and commodities supply.
Markets: higher volatility - markets remain resilient
Global equities most trading positive
Gold with new all-time high over USD 4’200/oz
Bond yields falling broadly except the long-term yields in the US up to 4.04% from 4.0%
US dollar is weaker again
Cryptos: Bitcoin stabilized over USD 110’000
My View: The combination of solid bank earnings and lingering rate-cut optimism keeps markets broadly supported for now. Yet, the reappearance of trade war rhetoric is a reminder of how fragile sentiment remains.
Volatility has been rising since the first tariff threats resurfaced. This warning signal should not be ignored. If volatility remains elevated, quant driven managers like CTA (Commodity Trading Advisor) programs and other risk-budgeted systematic strategies could be forced to quickly unwind leveraged long positions to remain within defined risk limits. Such technical selling could amplify short-term market swings and lead to sharper drop of indices.
Another risk seen end of last week, is one similar the washout in Altcoins. Investors had significant losses in a very short timeframe of minutes. Are investors leveraged, they could be forced to liquidate immediately their equity investments due to margin call.
For the ETFMandate portfolio, I added more short positions in the recent days, at the same time staying invested in defensive positions with long-term investment horizon together with commodities and miners. I remain highly alerted to rising volatility and potential spillover risks from the renewed trade tensions.
Become a member to access more valuable market updates like this
