QCP Asia Colour - 2 April 25
It's Liberation Day in the U.S. and Trump is expected to unleash a volley of tariffs later tonight at the Rose Garden. While there was some semblance of clarity yesterday, visibility remains low. To borrow from the president's own playbook, last-minute brinksmanship was never a key chapter in "The Art of the Deal".
The latest wave of tariffs appear to target a broad swatch of countries, including Japan, China, Canada, and the EU. The U.S. seems increasingly intent on isolating itself in pursuit of more favourable trading terms, but early indications suggest that key counterparts aren't inclined to concede. In fact, the opposite may be happening. Rather than fracturing under pressure, global players appear to be closing ranks. Just yesterday, officials from China, Japan and Korea convened to explore deeper regional trade cooperation.
Market implications? In the short term, we expect all risk assets to remain under pressure. But as the new status quo beds in, we could witness pockets of ex-U.S. exceptionalism. Global equity indices may continue to push toward new highs, even as the U.S. risks being sidelined by its own policy choices.
Turning to the Fed, markets continue to price 2.5 cuts in 2025. The Fed finds itself in a tight corner with consumer confidence and soft data coming in weak which may portend weaker GDP in Q2. At the same time, tariff-induced inflationary pressures could start building after April 2. In a classic stagflationary environment, the Fed is more likely to hike than cut. In the current environment, the Fed appears inclined to adopt a wait and see approach.
In crypto, sentiment remains broadly subdued. BTC continues to trade without conviction, while ETH is holding the line at $1,800 support. Across the board, crypto markets are showing signs of exhaustion with numerous coins down 90% YTD, with some shedding over 30% in the past week. Without a material shift in macro or a compelling catalyst, we don't expect a meaningful reversal. While light positioning could support a grind higher, we're not chasing any upside moves until the broader macro picture improves.
