{"id":17674,"date":"2025-04-11T09:22:47","date_gmt":"2025-04-11T09:22:47","guid":{"rendered":"https:\/\/www.vtmarkets.com\/?p=17674"},"modified":"2025-04-11T09:22:47","modified_gmt":"2025-04-11T09:22:47","slug":"how-to-trade-during-trumps-tariff-storm","status":"publish","type":"post","link":"https:\/\/www.vtmarkets.com\/en-eu\/opinion\/how-to-trade-during-trumps-tariff-storm\/","title":{"rendered":"How to trade during Trump\u2019s tariff storm"},"content":{"rendered":"\n
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Seventy-eight days into Donald Trump\u2019s second term, global markets are already rattled by his aggressive trade stance. From day one, the US has imposed a wave of tariffs, triggering a fresh and unpredictable trade war.<\/p>\n\n\n\n

The financial world is now grappling with sharp asset declines, unusual alliances among major economies like Japan, China, and South Korea, and a surge in market volatility.<\/p>\n\n\n\n

Traders face one of the most uncertain environments in recent memory. So, how do you navigate this tariff-fuelled chaos?<\/p>\n\n\n\n

In this guide, we\u2019ll break down how Trump\u2019s tariffs are reshaping trading strategies, explore potential recession risks, and examine whether assets like Bitcoin might rebound. Let\u2019s dive into what traders should watch \u2014 and how they can stay ahead.<\/p>\n\n\n\n

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Is it a good time to short US stocks and bonds?<\/strong><\/h2>\n\n\n\n

US stocks: Market conditions and risks<\/strong><\/p>\n\n\n\n

As of April 2025, US equities are under heavy pressure. The S&P 500 has dropped by 21.3%, while the Nasdaq Composite is down 25.6% \u2014 both firmly in bear market territory.<\/p>\n\n\n\n

While these levels often indicate recession, there have been exceptions (e.g. 1962, 1987, 2022). Still, the spike in the VIX \u2014 Wall Street\u2019s volatility index \u2014 is sounding alarm bells.<\/p>\n\n\n\n

On 7 April, the VIX hit 60.13 and closed at 46.93 the next day \u2014 levels not seen since the 2008 and 2020 crashes. This signals extreme market fear, typically observed near bottoms.<\/p>\n\n\n\n

Yet history shows that while VIX spikes above 50 can lead to short-term rebounds, they don’t always prevent deeper declines. In 2008 and 2020, markets kept falling even after fear peaked.<\/p>\n\n\n\n

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Should traders short stocks now?<\/strong><\/p>\n\n\n\n

There could still be room for further downside. If recession fears escalate or corporate earnings disappoint, markets may slip lower. However, much of the negativity appears to be priced in already.<\/p>\n\n\n\n

For traders, timing is everything \u2014 it\u2019s wise to watch for signs of economic stabilisation or shifts in policy before holding onto short positions too long.<\/p>\n\n\n\n

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US bonds: A changing narrative<\/strong><\/h2>\n\n\n\n

The outlook for US Treasuries has shifted, with the 10-year yield falling to around 4.0% \u2014 its lowest since October 2024.<\/p>\n\n\n\n

This drop reflects a classic \u201cflight to safety\u201d amid growing recession fears. The yield curve remains inverted, with short-term yields above long-term ones \u2014 a pattern that has reliably preceded past recessions.<\/p>\n\n\n\n

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Should traders short bonds?<\/strong><\/p>\n\n\n\n

Shorting bonds looks increasingly risky. With investors flocking to safe assets, bond prices are rising and yields could fall even more. Unless inflation unexpectedly surges, the environment now favours long bond positions.<\/p>\n\n\n\n

The likelihood of additional Fed rate cuts and moderate inflation expectations further reduce the appeal of bond shorts. A cautious, defensive bond strategy appears more suitable for current conditions.<\/p>\n\n\n\n

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Will there be a recession?<\/strong><\/h2>\n\n\n\n

The risk of a US recession<\/a> continues to climb, with several leading indicators flashing warning signs.<\/p>\n\n\n\n

Key recession indicators:<\/strong><\/p>\n\n\n\n