10-year yields pare gains after strong auction, tariff delay

NEW YORK – Benchmark 10-year Treasury yields pared an earlier rise on Wednesday after the US Treasury Department saw strong demand in an auction of the notes and after President Donald Trump announced a pause on some tariffs placed on US trading partners.

Together, the events are likely to bring more stability to the market, at least short term, analysts said. A sharp surge in yields this week and reports of large liquidations of bonds had raised concerns about deteriorating market liquidity.

“The liquidity in the Treasury market was the big elephant in the room from a risk perspective,” said Matt Eagan, portfolio manager and head of the full discretion team at Loomis, Sayles & Co. “It’s helped stabilize things because… we were getting very close to a period where the market became dysfunctional.”

The Treasury sold the 10-year notes at a high yield of 4.435%, around three basis points below where they had traded before the sale. Demand was 2.67 times the amount of debt on offer, the highest ratio since December.

Indirect bidders, which include foreign central banks, took a much larger share of the auction than usual at 87.9%, potentially allaying some concerns about foreign demand for the debt.

The two largest foreign holders of Treasuries, however, Japan and China, both have direct access to the auctions, and direct bidders took just 1.4% of the sale, the lowest portion in about 15 years, according to Lou Brien, strategist at DRW Trading.

The Treasury will also auction USD 22 billion in 30-year bonds on Thursday.

The 10-year note yield was last up 12.6 basis points on the day at 4.386%. It earlier reached 4.515%, the highest since February 20.

Thirty-year bond yields gained 6.1 basis points to 4.776% and got as high as 5.023%, the highest since November 2023.

Longer-dated yields have surged this week as traders exit the market due to forced selling to meet margin requirements, reaching stop-loss levels or taking profits from a sharp rally late last week.

Speculation has also increased that large foreign holders of Treasuries, including China may be offloading some of their portfolio as they face off against the United States in a rapidly escalating trade war.

Trump raised tariffs on China on Wednesday, even as he said he would temporarily lower new tariffs on many countries.

The interest-rate sensitive two-year yield has been more stable, but jumped on Wednesday on expectations the Federal Reserve will not cut rates as soon and as aggressively following Trump’s tariff pause. It was last up 20 basis points at 3.94% and reached 4.039%, the highest since March 27.

Fed funds futures traders are now pricing in three 25 basis point cuts by year-end, with the first most likely in June. Those expectations had gotten as high as five cuts this year, with a May start.

The yield curve between two- and 10-year note yields flattened to 44 basis points, after earlier reaching 74 basis points, the steepest since January 2022.

Some of the steepening had been due to inflation concerns, with those fears now easing somewhat due to the tariff pause.

Fed policymakers were nearly unanimous at their meeting last month that the US economy faced risks of simultaneously higher inflation and slower growth, according to the minutes of the meeting on Wednesday.

Market volatility, meanwhile, is likely to remain elevated as traders continue to gauge how tariffs will play out on the US and global economy.

“One thing that it (the pause) doesn’t do is eliminate uncertainty. The uncertainty is because the level of tariffs just seems to change from day-to-day,” said John Canavan, head analyst at Oxford Economics in New York.

(Reporting By Karen Brettell; Additional reporting by Lewis Krauskopf; Editing by Chizu Nomiyama, Nick Zieminski, and Nia Williams)

US stocks surge, dollar gains in dramatic relief rally as Trump pauses tariffs

NEW YORK – Stock indexes posted their biggest one-day gains in years, with the S&P 500 recording its largest rise since 2008, while the dollar gained and Treasuries pared losses on Wednesday after US President Donald Trump declared a temporary US pause on tariffs.

The announcement by Trump came in the afternoon after days of market turmoil, with bond prices and the US dollar selling off earlier in the day on fears that the administration’s plans to raise tariffs to levels last seen more than 100 years ago would push the economy into recession.

The president announced an immediate 90-day tariff pause for many countries even as he raised the levy on Chinese imports to 125%.

The news of a pause brought sudden relief to the market. The S&P 500 ended 9.5% higher, while the Nasdaq rose 12.2% in its biggest one-day gain since January 3, 2001, and its second-biggest on record. But investors said uncertainty about the longer-term plan for tariffs persisted.

“This is the pivotal moment we’ve been waiting for,” said Gina Bolvin, president of Bolvin Wealth Management Group in Boston. “The timing couldn’t be better, coinciding with the start of earnings season.”

“However, uncertainty looms over what happens after the 90-day period, leaving investors to grapple with potential volatility ahead,” Bolvin added.

The upcoming US quarterly reporting period will offer more insights into the health of corporate America, with several US banks, including JPMorgan Chase, due to report results on Friday.

Benchmark 10-year Treasury prices had also trimmed earlier losses after the US Treasury Department saw strong demand in an afternoon auction of the notes.

The yield on benchmark US 10-year notes rose 6.8 basis points to 4.328%. It earlier reached 4.515%, the highest since February 20. Bond yields move opposite to prices.

A sharp selloff in Treasury prices this week and reports of large liquidations of bonds had raised concerns about deteriorating market liquidity.

The dollar was lower before Trump’s announcement.

The selloff in US assets since Trump’s announcement of sweeping tariffs on April 2 has been broad and deep, with Deutsche Bank analysts in a note earlier on Wednesday saying that the “market has lost faith” in them and the world was entering uncharted territory in the global financial system.

The dollar index, which measures the greenback against a basket of currencies, including the yen and the euro, rose 0.25% to 103.03, with the euro down 0.08% at USD 1.0947.

Against the Japanese yen, the dollar strengthened 1.04%, while the dollar rose 1.01% versus the Swiss franc.

US stocks sharply extended gains on Trump’s announcement.

The Dow Jones Industrial Average rose 2,962.86 points, or 7.87%, to 40,608.45, the S&P 500 rose 474.13 points, or 9.52%, to 5,456.90 and the Nasdaq Composite rose 1,857.06 points, or 12.16%, to 17,124.97.

MSCI’s gauge of stocks across the globe rose 42.32 points, or 5.70%, to 785.28. Earlier in the day, the pan-European STOXX 600 index ended down 3.5%.

Oil prices also jumped on the tariff news.

Brent futures rose USD 2.66, or 4.23%, to settle at USD 65.48 a barrel. US West Texas Intermediate crude futures rose USD 2.77, or 4.65%, to USD 62.35.

(Reporting by Caroline Valetkevitch in New York, additional reporting by Amanda Cooper in London; Additional reporting by Stella Qiu in Sydney; Editing by Gareth Jones, Alex Richardson, Chizu Nomiyama, Emelia Sithole-Matarise, and Matthew Lewis)

Oil prices slide 2% to near 4-year low as US trade conflict fuels recession fears

NEW YORK – Oil prices slid 2% to a near four-year low on Monday on worries US President Donald Trump’s latest trade tariffs could push economies around the world into recession and reduce global demand for energy.

Brent futures fell USD 1.37, or 2.1%, to settle at USD 64.21 per barrel, while US West Texas Intermediate crude futures fell USD 1.29, or 2.1%, to settle at USD 60.70.

That pushed both crude benchmarks, which fell about 11% last week, to their lowest closes since April 2021.

The session was marked by extreme volatility with intraday prices down more than USD 3 a barrel overnight and up over USD 1 Monday morning after a news report said Trump was considering a 90-day pause on tariffs. White House officials quickly denied the report, sending crude prices back into the red.

Confirming investor fears that a full-blown global trade war has begun, China, the world’s second-biggest economy behind the US, said on Friday it would impose additional levies of 34% on American goods in retaliation for Trump’s latest tariffs.

Trump responded that the US would impose an additional 50% tariff on China if Beijing does not withdraw its retaliatory tariffs on the US, and said “all talks with China concerning their requested meetings with us will be terminated.”

The European Commission, meanwhile, proposed counter-tariffs of 25% on a range of US goods on Monday in response to President Donald Trump’s tariffs on steel and aluminum, a document seen by Reuters showed.

Goldman Sachs forecast a 45% chance of recession in the US over the next 12 months, and made downward revisions to its oil price projections. Citi and Morgan Stanley also cut their Brent outlooks. JPMorgan said it sees a 60% probability of recession in the US and globally.

In addition to growing recession worries, there are growing concerns that the Trump administration’s policies will cause the price of goods to increase.

US Federal Reserve Governor Adriana Kugler said some of the recent rise in goods and market-services inflation may be “anticipatory” of the effect of the Trump administration’s policies, adding that it is a priority for the Fed to keep inflation in check.

The Fed and other central banks use higher interest rates to combat inflation. Higher interest rates, however, boost consumer borrowing costs and could cause economic growth and oil demand to decrease.

SUPPLIER REACTION

Saudi Arabia on Sunday announced sharp cuts to crude oil prices for Asian buyers, dropping the price in May to the lowest level in four months.

“It’s a demonstration of the belief that tariffs will hurt oil demand,” said PVM analyst Tamas Varga. “It goes to show the Saudis, just like every man and his dog, expect the supply and demand balance to be affected and they are forced to cut their official selling prices.”

Adding to the downward momentum, the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and its allies decided to advance plans for output increases. The group now aims to return 411,000 barrels per day to the market in May, up from the previously planned 135,000 bpd.

During the weekend, OPEC+ ministers emphasised the need for full compliance with oil output targets and called for over-producers to submit plans by April 15 to compensate for pumping too much.

(Reporting by Scott DiSavino in New York, Anna Hirtenstein, and Robert Harvey in London; additional reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo. Editing by David Goodman, Mark Potter, Rod Nickel, and Nick Zieminski)

Sickly dollar leaves shrinking pool of safe havens

LONDON – Foreign exchange traders often describe the US dollar as the “least dirty shirt” in the laundry basket. But President Donald Trump’s tariffs have tarnished the currency’s status as a preferred choice in a crisis. The Swiss franc and Japanese yen are alternative beneficiaries. Still, in a global downturn there are few places for investors to hide.

In previous crises like the 2008 financial meltdown and the 2020 Covid pandemic, investors reflexively reached for the relative safety of the greenback. In the months after Trump’s re-election, traders pumped up the value of the American currency in the expectation that his policies would unleash economic growth. Even on the eve of the president’s tariffs announced on April 2, economists and investors expected that levies on US imports would lead to a stronger dollar.

That hasn’t happened. The day after Trump’s self-professed “Liberation Day” the greenback lost nearly 2% of its value against a basket of major trading partners, and has since failed to fully recover. Growing fears that a trade war would lead to a US recession and lower interest rates have weakened its appeal. Trump’s erratic policymaking has also shaken investors’ faith in US assets.

Yet investors looking for alternatives have received mixed signals from markets. Gold has historically been a refuge from financial turmoil but the spot price of the yellow metal, which had risen by almost a fifth since the beginning of the year, has tumbled since Trump’s announcement. That may be because traders and hedge funds are selling assets to cover losses elsewhere.

The Swiss franc and Japanese yen are relative winners. Both currencies have strengthened against the dollar, even though their economies are on the receiving end of bigger-than-expected tariffs. Meanwhile, the euro has been a surprise beneficiary. The single currency region faces extra tariffs of 20%, threatening 532 billion euros of exports to the US Yet the euro jumped 1.8% against the dollar on April 3 – its biggest daily rise since November 2022. Again, the lack of alternatives may be helping.

The next wave may be equally unpredictable. If tariffs push up prices, Federal Reserve Chair Jerome Powell may have to keep rates elevated, supporting the greenback. Gold too, may thrive in an inflationary environment.

Even if the dollar rout resumes, not all havens will remain equally appealing. If investors truly abandon the dollar, then rival currencies could shoot up. That would put pressure on other central banks to counter rising exchange rates, as the Swiss did during the euro zone crisis in 2011. The euro zone, meanwhile, could get caught in a wave of tit-for-tat tariffs which would damage its economy and currency. In a truly global crisis, there are no clean shirts.

CONTEXT NEWS

Investors on April 7 pushed up the value of the Japanese yen and Swiss franc as the market rout triggered by US President Donald Trump’s sweeping tariffs deepened and fears of a global recession grew.

The Swiss franc strengthened by almost 1% against the US dollar in European morning trading to 0.8525, extending its surge against the greenback the previous week. The Japanese yen was trading 146 against the dollar, a change of 0.5%.

The US dollar Index was down 0.13%. It has fallen by more than 1% since April 2, when Trump announced tariffs on most of America’s trading partners.

(Editing by Peter Thal Larsen and Streisand Neto)

Gold slips as investors opt for dollar amid escalating trade war concerns

Gold prices fell more than 2% on Monday, with investors turning to the dollar as a safe haven after sweeping US tariffs raised fears of a global recession.

Analysts, however, remained bullish on bullion, given the challenging economic conditions.

Spot gold was down 2.4% to USD 2,963.19 an ounce as of 1:36 p.m. ET (1736 GMT), after hitting a near four-week low of USD 2,955.89 earlier in the session. US gold futures settled 2% lower at USD 2,973.60.

“Gold retreats as investors turn to cash and other safe havens like the Swiss Franc and the Japanese Yen amid market turmoil, creating a risk of deeper corrections,” said Nikos Tzabouras, senior market analyst at Tradu.com.

The dollar rose against its rivals, moving away from a six-month low touched last week. A stronger greenback makes gold more expensive for other currency holders.

“We’re getting a lot of stress in the gold market because of liquidity concerns and margin covering by speculators,” said Bart Melek, head of commodity strategies at TD Securities.

Major stock indexes fell in volatile trading after US President Donald Trump warned of a 50% tariff on China if it doesn’t drop its retaliatory tariffs.

Meanwhile, the White House labelled reports of Trump considering a 90-day pause on tariffs for all countries except China “fake news”.

Futures now point to around 120 basis points’ worth of interest rate cuts by the US Federal Reserve by December, with markets pricing in about a 37% chance of a US rate cut in May.

Lower rates increase the appeal of bullion as it yields no interest.

Gold, used as a safe investment during times of political and financial uncertainty, scaled an all-time peak of USD 3,167.57 last Thursday, boosted by strong safe-haven inflows amid geopolitical uncertainties and strong central bank demand.

Spot silver rose 0.5% to USD 29.71 an ounce, recovering from a near seven-month low hit earlier in the day.

Spot platinum fell 1% to USD 907.09, while palladium eased 0.9% to USD 903.19.

(Reporting by Brijesh Patel, Anmol Choubey, and Ishaan Arora in Bengaluru; Editing by Susan Fenton, Shailesh Kuber, and Mohammed Safi Shamsi)

Dimon warns of economic impact of trade war, sees possible recession

NEW YORK – JPMorgan Chase CEO Jamie Dimon on Monday warned that trade wars could have lasting negative consequences, days after he and other US bank CEOs met with Commerce Secretary Howard Lutnick to discuss the administration’s sweeping tariffs.

“The economy is facing considerable turbulence,” Dimon wrote. “We are likely to see inflationary outcomes … Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.”

Dimon’s annual letter to shareholders followed a rout last week that wiped trillions of dollars off global stock markets in the wake of President Donald Trump’s new tariffs.

Dimon and other bank chiefs met with Lutnick in Washington on Thursday, a day after the tariffs were announced, to discuss the levies and ask questions, a source familiar with the meeting said.

The session was hosted by the Financial Services Forum, an industry lobby group, an administration official and the lobby group confirmed.

Dimon, 69, is one of the most prominent voices in corporate America and has regularly been consulted by administrations during times of crisis. His name was floated for senior economic roles in government during the 2024 presidential campaign, including Treasury secretary, but he stayed put at the bank.

Other Wall Street leaders also raised alarm as markets slumped. BlackRock CEO Larry Fink said on Monday stocks could extend their decline by 20%, noting views among his peers that the US economy is probably already in a recession.

Billionaire fund manager Bill Ackman, who supported Trump in his presidential bid, said the tariffs could lead to an “economic nuclear winter,” while hedge fund founder Boaz Weinstein told Bloomberg an economic “avalanche” has just begun.

Ackman urged the president to pause the tariffs while renegotiating trade deals. He said on X the tariffs would stymie business investment and consumer spending and “severely damage” the United States’ reputation for years, he wrote.

Credit spreads could easily widen as economic uncertainty potentially leads to a severe recession, Weinstein said. “I’m very concerned about a crash,” he said.

Investor Stanley Druckenmiller said in a post on X that he did not support tariffs exceeding 10%. Hedge fund manager James Chanos said, “This escalation threat is a very big deal,” after Trump said the US could impose more tariffs on China.

JPMorgan’s economists raised the risk of a US and global recession this year to 60% from 40% after Trump unveiled the trade barriers.

“The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse,” Dimon wrote.

He said the risks from the tariffs and trade war included persistent inflation and high fiscal deficits. He also saw risks of damaging economic confidence, investments, capital flows, corporate profits and the dollar.

Separately, major bank CEOs including Dimon and Bank of America CEO Brian Moynihan held a call on Sunday to discuss the tariffs, sources familiar with the matter said. The call was convened by the Bank Policy Institute, an association representing large US lenders, they said.

JPMorgan will report its first-quarter results on Friday. It earned a record annual profit last year.

Dimon warned that expectations the US will avoid slipping into recession could be derailed.

“Markets still seem to be pricing assets with the assumption that we will continue to have a fairly soft landing. I am not so sure,” Dimon wrote.

(Reporting by Nupur Anand in New York and Pete Schroeder in Washington, additional reporting from Svea Herbst-Bayliss, Tatiana Bautzer, and Ross Kerber; Editing by Lananh Nguyen, Himani Sarkar, Chizu Nomiyama, Kevin Liffey, and Cynthia Osterman)

US credit spreads continue to widen, no new bonds announced

No new offerings were announced in the US investment-grade and high-yield bond markets for the third consecutive day as credit spreads, or the cost of issuance, continued to increase on worries that US President Donald Trump’s tariff war could lead to a recession.

Since Trump imposed sweeping tariffs on US imports on Wednesday, credit spreads, which are the premium companies paid on bonds over Treasuries, have widened sharply to two-year lows.

The average investment-grade spreads were at 120 basis points to end Monday trading, or 24 bps wider since last Wednesday, the widest they have been since November 2023.

The average high-yield spreads at 461 bps have widened 119 bps since Wednesday and are now also at the widest level since June 2023, according to ICE BAML data.

Guy LeBas, chief fixed income strategist at Janney Capital Management, said he expected to see some dip buying to emerge at some point if equity markets show signs of recovering from the recent selloff.

“These are just sloppy, sloppy markets that don’t follow any measure of fundamentals or technical,” he said.

The halt in issuance followed a period last month when, for the first time since the pandemic, companies struggled to issue bonds at the price they wanted – a situation that continued on Monday, two bond syndicate bankers said.

There were a few companies that looked early to issue bonds, but they decided not to go ahead as continued market volatility meant they were unsure demand would be enough to support issuance without being asked to pay a massive premium, said one syndicate banker who preferred to be unnamed.

“The most pressing question at this point is obviously what would begin to turn the narrative and give risk assets some respite from the aggressive selling of the past few sessions,” said Krieter.

A softening in tone on tariffs from the Trump administration or more urgency to negotiate with US trading partners would help, “though the weekend’s developments don’t provide much hope for either outcome in the near term,” he said.

If high-yield bond spreads continue to widen, the global default rate could surpass 8% in a year’s time from less than 5% today, said Sharon Ou, vice president and senior credit officer at Moody’s Ratings.

Mike Sanders, head of fixed income at Madison Investments, said corporate credit spreads had a widening bias, but he expects signs of stability to first emerge in high-grade bonds.

The last investment-grade bond to price last Wednesday was issued by the financing arm of Holcim, which raised USD 3.4 billion in a four-tranche offering, and spreads on those bonds were bid 10-15 bps wider on Monday, said Sanders. The spreads on some other highly rated 10-year bonds from Home Depot, and Coca-Cola, were quoted 15-20 bps wider, he added.

(Reporting by Shankar Ramakrishnan and Matt Tracy; Editing by Nick Zieminski, Chizu Nomiyama and Rod Nickel)

Markets’ tariff carnage can get much, much worse

NEW YORK – The age-old warning to unsophisticated investors hungry to buy a dip: beware of catching a falling knife. US equity markets are collapsing, with the S&P 500 heading toward the 20% bear market decline threshold after notching its worst two consecutive trading days since March 2020. It might just be the start. As investors parse through the damage after President Donald Trump raised US tariffs to their highest level in a century, market volatility is spiking, and forecasts for earnings are tumbling, promising yet more downside.

Traders have yet to fully grasp this new reality. Wall Street estimates for earnings per share of the S&P 500 Index, representing the earning power of the biggest US-listed firms, still hovers a bit over USD 275 for this year, up 13% from 2024, according to LSEG data. As analysts grapple with the details of rising costs and potential economic blowback, some banks are now lowering their projections. Goldman Sachs has reduced its guess on earnings-per-share growth to 3%, while UBS has cut all the way to zero.

Rising risks of economic catastrophe amp this up further. UBS expects two quarters of negative GDP growth this year, enough to qualify as a recession, if tariffs are fully implemented. At prediction market Kalshi, the odds of such an economic contraction have crossed 60%. Since World War Two, S&P 500 earnings have dropped by a median of 13% from peak to trough in recessions, according to Goldman Sachs. A similar drop from 2024 would result in an earnings-per-share target for the S&P 500 of USD 211 in 2025.

The real pain, though, comes if investors begin to ascribe less value to each dollar of profit. Buoyed by the immense growth of technology companies like USD 2.8 trillion iPhone maker Apple or USD 2.3 trillion semiconductor firm Nvidia, the S&P 500 has traded at a median of 20.5 times estimates of year-ahead earnings since 2020, according to LSEG data, up from 16.9 times during the five years prior. As of April 4, the ratio stood at 18.4. In a world where US profit margins are strained by protectionist policies, any premium over the recent past looks suspect.

In its “bear case” scenario, JPMorgan anticipates no tariff relief and zero earnings-per-share growth through 2026. Applying a one-year forward multiple of 16 times, the bank’s researchers get an S&P 500 price target of 4,000 by year-end, nearly a fifth below Monday’s open. Anyone trying to grasp hold of this freefall may end up with a nasty gash.

CONTEXT NEWS

Major global stock indexes fell on April 7 for the third-straight session in the wake of President Donald Trump’s announcement of sweeping tariffs on US trading partners. The S&P 500 is down around 12% from the close of trading April 2, falling into bear-market territory. The CBOE volatility index surpassed 50 points, its highest level since the onset of the Covid pandemic.

(Editing by Jonathan Guilford and Pranav Kiran)

US stock futures tumble indicating another plummet on Wall Street

US stock futures opened sharply lower late on Sunday, suggesting a continuation of the two-day selloff that wiped trillions from equity values after the Trump administration’s tariffs announcement last week.

Investors had been anticipating another week of turbulence as global trading partners react to the harsher-than-expected tariffs. US S&P 500 E-minis stock futures were last down 4%. Dow E-minis were down 3.8%, while Nasdaq 100 E-minis were down 4.6% at the open on Sunday.

In the two days following Trump’s Wednesday tariff announcement, the benchmark S&P 500 index fell 10.5% and lost about USD 5 trillion in market value. It was the biggest two-day loss since March 2020. Thursday and Friday’s steep slide put the S&P 500 down more than 17% from its February 19 all-time closing high, and brought it closer to bear market territory, which is typically defined as a 20% decline.

“The bull market is dead,” Mark Malek, chief investment officer at Siebert Financial, said ahead of futures opening. “We might see some gains in the next few days, but for now they’re not going to be sustainable.”

The timing of the tariffs news, which coincided with the beginning of the first-quarter earnings season, is contributing to the gloomy outlook, Malek said.

On Sunday morning talk shows, Trump’s top economic advisers sought to portray the tariffs as a savvy repositioning. Treasury Secretary Scott Bessent said on NBC News’ “Meet the Press” that there was “no reason” to anticipate a recession.

Some traders believe the stock market will at least attempt to stage a comeback of sorts.

“Sometime this week it’s probably inevitable that we will have an up day,” said Steve Sosnick, chief investment strategist at Interactive Brokers, ahead of futures opening.

The question remains about the sustainability of any rally.

“We may see a day this week where screens are green, but any lasting rally may not arrive for three or four weeks,” said Alex Morris, chief investment officer at F/m Investments. “At that point, people will start saying we’ve taken enough air out of the balloon.”

(Reporting by Suzanne McGee; additional reporting by Sinead Carew; Editing by Megan Davies and Leslie Adler)

Latam assets may receive a trade-war boost, investors say

NEW YORK – Latin American stocks and bonds could be unlikely winners as the Trump administration’s trade war so far mostly spared the region, while it triggered a market rout on Wall Street that has sent investors on a hunt for non-US assets.

The Nasdaq stock index opened Friday more than 20% below its December record high and Wall Street’s “fear gauge” hit an eight-month high. The dollar touched a six-month low this week.

Meanwhile, the outperformance of some corners of emerging-market equities and currencies, and the resilience of bonds, have not gone unnoticed.

Latin America was mostly spared the imposition of additional tariffs in US president Donald Trump’s announcement this week that upended decades of trade policy, partly because most of the region has a trade deficit with the world’s largest economy.

Despite a massive Friday selloff, the MSCI Latam stocks gauge is beating the S&P 500 by more than 20 percentage points so far in 2025.

The recent returns and a rethinking of global trade could bring new types of investors to Latin American assets, according to Kathryn Exum, co-head of sovereign research at Gramercy.

“Stepping back, we’re obviously in a new paradigm for trade and a reorganization of global trade. Assuming that you end up with more regionalized blocks of trade, Latin America would be a winner in that regard,” she said.

“Perhaps it starts to increase flows,” she added. “Whether it’s FDI (foreign direct investment) flows or portfolio flows will depend on the country at hand, and whether we’re talking about short-term or over the medium term.”

Evidence of a shift may be found in Brazil and Mexico, the region’s largest economies by far. Stock markets in both countries have risen this year, and their currencies are up against the dollar.

Economists said Brazil is better placed than most countries to deal with tariffs, while Mexico’s preferred treatment from a US trade standpoint is expected to continue.

A shift toward Latam follows months of volatility on Wall Street as the prevailing market view of US assets as the only destination was under review, and investors realigned growth expectations in the US and globally.

“Emerging Market assets in general are outperforming during this period of volatility, and we attribute this to a mixture of improving fundamentals, favorable technical factors, and attractive relative valuations,” said Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS.

“There’s also a growing sentiment among investors questioning US exceptionalism, which is likely to drive diversification flows towards EM assets.”

Yet Friday’s market selloff, triggered by counter tariffs from China, is a reminder that no one would be spared if the global economy goes into recession.

The size of the Latin American stock market is a limitation, as the top 10 companies in the regional MSCI index combine for a market capitalization of near USD 230 billion, while the market cap of Apple alone sits near USD 3 trillion.

In addition, Latin America’s idiosyncrasies could also prove a barrier to more investment, said Samy Muaddi, head of EM fixed income at T. Rowe Price.

“While Latin America was less directly impacted (by US tariffs), any country running twin deficits in a period of tightening financial conditions could suffer from collateral damage.”

(Reporting by Rodrigo Campos in New York; Editing by Matthew Lewis)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Quarterly Economic Growth Release: 5.4% Q12025

Policy rate views: Uncertainty stalls cuts