Update Equity - From tariffs to debt: the turmoil remains
These days, it seems there is one bad headline after another coming from the White House. Just as the tariff-related turmoil is starting to subside, fears of a ballooning US debt have ignited turmoil once again. After a strong recovery since ‘Liberation Day’, markets are getting ready for the next chapter.
Despite the temporary trade tariff pause, the clock is ticking. The 90-day pause period expires at the beginning of July, with further negotiations taking place in the coming weeks. However, as the end of the pause period approaches, the uncertainty regarding the tariffs may also increase again.
Compounding these concerns, investors must now deal with yet another issue: the US debt. This concern has been heightened since Moody’s, the credit agency, downgraded the US credit rating and kept it on a negative outlook. Moreover, the tax bill that US President Donald Trump aims to pass will likely add another USD 3 to 5 trillion to the US debt. This development further challenges the financial position and leads investors to demand higher returns for holding US debt. US interest rates are again rising to year-high levels. Due to these spiking yields, equity markets fell as borrowing costs for companies and consumers are rising.
Meanwhile, the earnings season is coming to an end, though some big tech names like Nvidia and Salesforce are still to report earnings next week. This week, cybersecurity company Palo Alto opened its books. The company continues to see a growing demand for security products and showed that its platformization-strategy is starting to bear fruit. However, Palo Alto did not succeed in easing growth fears among investors, which caused the stock price to drop by almost 7%. Medical equipment company Medtronic also reported its results. The share slipped by just over 2% after the company’s forecasted adjusted profit for 2026 fell short of expectations. Medtronic also announced plans to spin off its diabetes business into a standalone company. Finally, Home Depot, a leading home improvement retailer, published better-than-feared earnings. The company reaffirmed its full-year guidance, which could be an indication that Home Depot is well-positioned to navigate tariffs. However, challenges still include a weak housing market and an increasingly cautious consumer.