Update Equities: Tariff uncertainty is driving volatility
Global markets had a difficult week, accentuating the relative shift in equity performance since the start of the year. Tariff fears are weighing on US confidence and are further unwinding ‘US exceptionalism’.
In addition, the high stock and sector concentration is starting to be a drag on US index performance. US stocks sank particularly on Tuesday. Much of the volatility was caused by uncertainty about tariffs: President Donald Trump pledged initially to double tariffs on steel and aluminium from Canada, but reversed course several hours later, after Canada announced proposals to retaliate. The White House has already announced that further tariffs will be coming for all its key trading partners.
Markets suffered in all geographies, with the US witnessing the worst declines - all but the energy sector were in negative territory. European markets also suffered. The only bright spots were energy, communication services and utilities.
While the majority of companies have already reported quarterly earnings, there were still some noteworthy results released this week. Adobe, for example, published better-than-expected fourth-quarter results, but the outlook for 2025 while remaining stable did not lead to a positive market reaction. Results from software giant Oracle came in slightly below market expectations, although the company continues to enjoy a strong tailwind in artificial intelligence. Fashion leader Inditex, the owner of Zara, saw its stock tumbling this week following a slow start of the year. This led to investor concerns about the company’s growth prospects. Notable negative stock movements in the US included tourism-related companies, such as United Airlines, Delta Air Lines, Expedia and Carnival. In Europe Puma, Daimler and Novo Nordisk were the worst performers.