Market Stories by Fathom 24/04/2025

We're now about three weeks out from Liberation Day, and the economic fallout is really starting to show. The U.S. administration seems to be holding trade negotiations out in the open — but basically with themselves. So far, not a single country has caved or struck a deal (as Japanese MP Oguma bluntly put it, nobody wants to “kiss his ass”). And why would they? Giving in to what increasingly looks like extortion would set a dangerous precedent for any nation that values its sovereignty and self-respect.

Worse yet for Washington, no one has joined the U.S. in turning against China — not in action or even in sentiment. The global pushback is already visible in numbers: the IMF this week slashed its 2025 global growth forecast to 1.8% from 2.4%, citing the tariff regime. That includes a 0.9% hit to U.S. growth, now seen at 1.7% (and that still feels generous), and a 0.5% hit to China, bringing it down to 4%. So much for “winning.”

Goldman’s Jan Hatzius laid it out clearly: tariffs raise inflation in the short run, but tariffs are essentially taxes, and taxes choke demand. That slowdown in demand eventually gives way to deflation, which historically walks hand-in-hand with recession. Simple as that.

Then came Monday’s market rout, sparked by Trump’s latest outburst — this time targeting Powell personally. Publicly attacking the Fed Chair is no small thing. It’s a serious institutional breach and another sign that checks and balances in the U.S. are eroding fast. The dollar’s recent collapse — DXY at three-month lows — is a warning signal, not a victory lap. Currencies are no longer tracking rate differentials, and the strength of gold, the euro, and the yen is flashing “risk off”.

Yes, markets bounced later in the week after Bessent seemed to pivot on China tariffs and showed support for Powell. But from the perspective of someone who's lived through a sovereign default — watch what they do, not what they say.

They say they’ll roll back China tariffs (from 140% down to 50–70%, which is still outrageous), but only if China makes the first move. And China won’t — because they were clearly targeted. Meanwhile, the U.S. just slapped massive tariffs on Chinese shipping operations, covering over half the world’s capacity, with charges from $1.5M to $20M per ship in any US port. Words vs. actions — and we know which one matters more.

In the short term, earnings season gives some relief. Many companies pulled forward demand ahead of the tariff shock, and risk assets have already repriced lower. There’s opportunity here — for long-term investors who can look past this Trump era of policy whiplash.

But stepping back — how do any of these major macro developments really justify higher valuations for risk assets in the medium term?

• A fractured global trade landscape

• Slowing growth across major economies

• Higher inflation in the U.S.

• Erosion of institutional credibility

• A Fed that may be forced to cut, not because it wants to, but because it has to

• And a general sense of geopolitical disorder

In short, we're in a volatile holding pattern. Maybe a pause, maybe more range-bound trading. But unless something dramatically changes — either in policy or in leadership — it’s hard to see the medium-term case for risk assets improving in a meaningful, sustainable way.

Alexandros Tavlaridis