Investors who think that the threat of trade tension is beginning to ease have been warned by investment giant Pimco that they are “misjudging” the will of President Trump.
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Investors Underestimating Trump
In an interview with the Financial Times, Dan Ivascyn, chief investment officer at Pimco, said that investors were underestimating the resolve of Trump to restore his ‘Liberation Day’ high rate tariffs plan. “Believe Trump. He believes in tariffs,” Ivascyn warned.
He added that investors were wrong to think that Trump would completely withdraw his threatened tariff hikes, following the pause in their implementation, or do so at a much lower rate.
“People still believe that there are going to be off-ramps to tariffs and we are going back to pre-Liberation day,” he said. “We are not so sure.”
High Recession Chance
He also warned that a recession is becoming increasingly likely. In fact, he stated that the probability of recession is the highest he had seen in several years.
Ivascyn’s assessment builds on comments from the Federal Reserve earlier this week that Trump’s policies had increased uncertainty over the economic outlook in the U.S. and could increase inflation and unemployment.
Indeed, Trump’s tariff strategy caused significant market disruption earlier this year both in the U.S. and around the globe. His decision to pause substantial reciprocal tariffs in early April for 90 days led to a market recovery, although the S&P 500 is still down around 7% over the last three months.
Trump’s imminent signing of a trade deal with the U.K., which could lead to similar agreements with major markets such as India, the EU and even China, has also driven investor optimism higher.
Riskier assets such as Bitcoin have prospered, as have U.S. tech stocks, with semiconductor giant Nvidia (NVDA) up 3% in the last five days and Meta Platforms (META) up 1%.
Ivascyn, however, said he favored high-quality sectors like mortgages as “the household balance sheet is very strong.”
Which Stocks are Most at Risk From Tariffs?
We have rounded up the stocks most at risk from tariffs using our TipRanks comparison tool.
