The first week of March has been more volatile than previous months combined. The volatility index ( Vix ) jumped to a high of 27, the level last witnessed in August 2024. This was caused by tariffs being applied on Canada and Mexico along with additional tariffs on China.
The surprising element that caused VIX to rise 43% in the week was investors' complacency that announcements were just negotiating tools. As a result, the shock led to risk adjustment, and the S&P 500, along with the Dollar index, fell by 3%.
There were some exceptions, but now the fear of the tariff announcements being actually applied has become a high probability. This has pushed investors to ask whether it impacts inflation or growth first and to what extent.
Over the next two to three quarters there are various tariffs that are scheduled to get implemented. Some of them will come into effect immediately and some have to pass through legislation. Though there will be exceptions global trade uncertainty will surely remain uncertain.
Even the USA President in his latest interview said or rather declined to say that recession is not possible this year. The problem is when and what triggers it and does it spread globally as the biggest trade market in the world changes how it does business.
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