Bloomberg Surveillance: Trump Tariffs, Economic Outlook, and Market Volatility

Market Reaction to Tariff Reversal

• 💡 Policy uncertainty remains heightened, leading to caution despite yesterday's market relief rally following the US president's tariff reversal.
• 📉 Economic assumptions for 2025 need to be lowered due to increased uncertainty, higher volatility, and slower growth.
• 📊 Portfolios are being adjusted by lowering overall risk, including reducing equity allocations closer to benchmark and increasing bond allocations.

US Assets and Gold

• 🇺🇸 Despite volatility originating from the US, a modest overweight to US equities is maintained due to a preference for US companies with strong profitability and consistent earnings.
• 🥇 Gold is liked as a safe-haven asset during turbulence and as a store of value against long-term fiscal deficits.
• ⚠️ The US dollar is still considered a safe-haven asset, and skepticism is advised regarding calls for the end of dollar dominance.

Energy Market Outlook

• 📉 Tariffs are expected to hurt global demand growth, leading to lower oil prices, despite a temporary pause in counter-tariffs.
• ⛽ Oil prices are projected to trend lower, with reduced oil demand forecasts for the second half of the year.
• 🛢️ Shale break-evens are higher, but prices could test the four-handle in the short term due to positioning and liquidation, with a floor around current levels.
• 🇰🇿 OPEC+ decisions are driven by internal dynamics, including ensuring compliance from members like Kazakhstan, rather than targeting specific price levels.

Banking Sector and Economic Sentiment

• 🏦 Investors are looking for insights into whether activity levels are permanently impaired for both corporations and consumers.
• 📊 Banks are seen as the best real-time data points, with commercial activity described as slow and flat, and capital markets showing little renaissance.
• 📈 Trading revenues could be strong due to volatility, but concerns exist about potential