In the night from Tuesday 8 April 2025 to Wednesday 9 April 2025, the far-reaching trade restrictions announced by US President Donald Trump last week initially came into force. The US briefly levied a base tariff of 10 per cent, to which country-specific tariffs, known as ‘reciprocal tariffs’, were added. For goods from Switzerland, the total rate was 31 per cent.
The announcement and the entry into force led to significant losses on the financial markets in recent days. The US stock markets lost the most and were almost 20 per cent below their all-time highs of February. European stock markets fared similarly. The Swiss market lost over 17 per cent of its value within a few days, as measured by the Swiss Market Index (SMI).
However, there was a surprising turnaround yesterday evening: Trump announced that he would again suspend the ‘reciprocal tariffs’ for 90 days – with the exception of China. This unexpected decision led to a very strong recovery on the financial markets within a very short period of time. In particular, the US stock markets were able to recover significantly from the previous losses. The leading S&P 500 index rose by almost 10 per cent, and the technology-heavy Nasdaq by over 12 per cent. The European stock markets and the Swiss SMI also benefited greatly, with pharmaceutical companies in particular recording significant price gains.
Despite this recovery, current events show that political uncertainties remain high. A complete reversal of the current US tariff policy is still unlikely. The basic tariff of 10 per cent remains in place and, due to ongoing tensions and a tariff-countertariff spiral, a tariff of 125 per cent now applies to China. Furthermore, the US government's goals of reducing the trade deficit, increasing state revenues through tariffs and strengthening the domestic industrial sector argue against a complete withdrawal.
The global economic environment therefore remains challenging. In the US, imported goods will become significantly more expensive even with reduced tariffs, and this will either fuel inflation or put severe pressure on corporate profit margins. This will further dampen economic growth in the US, which is already under pressure. At the same time, a decline in the volume of exports to the US is to be expected, which is also likely to weigh on the Swiss economy and many other countries. Added to this is the uncertainty about the applicable rules, which is slowing down investment worldwide. Against this backdrop, the probability of a noticeable weakening of the global economy has increased.
In this environment of high uncertainty, high volatility and a weaker economy, we remain defensively positioned. In particular, our underweight in US equities and in the overall equity quota has proven to be correct. In addition, we currently favour the yen as a safe haven and are maintaining our overweight in Swiss real estate.
Particularly in turbulent times such as these, it is crucial to keep a cool head and not to be unsettled by short-term market turbulence. After all, those who do not lose sight of their long-term goals and investment strategy have a clear advantage. Panic selling is rarely a good idea.