Market Insights April 22, 2025

The Fed’s independence under threat again.

The Chairman of the Federal Reserve (Fed) is once again under fire from Donald Trump. The White House is calling for an immediate rate cut to support the US economy, anticipating the first impacts of its trade war to be felt shortly.

These attacks on the Fed's independence are unsettling for investors, and all major US financial assets have reacted negatively to this renewed pressure. As a result, the dollar has once again dropped at the start of this week, hitting new lows against several currencies, including the euro and the Swiss franc. The lack of response from US authorities suggests that the short- to medium-term outlook for the dollar remains bearish. In this context, US equities have once again underperformed compared to other global markets. However, the major American indices are still holding above the lows reached earlier this month.

Regardless of Jerome Powell’s short-term fate, the US stock market appears capable of regaining some of the ground lost in recent weeks, as trade negotiations with partner countries gradually lead to agreements.

Does Europe have a card to play?

Unsurprisingly, the European Central Bank cut its key interest rates by 25 basis points to 2.25 % last week.

Several factors likely motivated this decision. First and foremost are trade tensions and the anticipated impact of tariffs on economic activity. Despite a partial retreat by Donald Trump, with a reduction in tariffs from 25 % to 10 % and a 90-day truce, the repercussions on the economy will still be felt. Persistent uncertainty will weigh particularly on business confidence. Added to this is the recent deterioration in financial conditions, as evidenced by widening credit spreads. Moreover, unlike the United States, inflation is no longer a concern in the eurozone, which is affected by a stronger euro and declining energy prices. Under these conditions, the ECB retains room to continue easing its monetary policy in the coming months.

Markets reacted poorly to the announcement of the tariffs, which were far more aggressive than expected, triggering a sharp correction in stock markets, including in Europe. However, it's worth noting that the old continent is only modestly exposed: exports to the United States account for just 3.1% of eurozone GDP. While tariffs will have a swift impact on certain companies and sectors, they are unlikely to derail the broader European economy. Furthermore, the trade war and the prospect of a gradual US military withdrawal from Europe have triggered significant fiscal stimulus, notably in Germany. This shift marks a change in paradigm, with positive effects likely to unfold over the long term.

For investors willing to look beyond short-term uncertainties, this volatility could present buying opportunities. For the first time in a while, Europe is benefiting from its own momentum, driven by fiscal expansion, which should support corporate revenues and profits. Valuations remain attractive on a global scale, both in terms of price-to-earnings ratios and dividend yields for shareholders. Lastly, capital flows suggest that Europe is only at the beginning of a catch-up phase, while other regions have already fully benefited from capital inflows

This week’s figure: 90’000 CHF/Kg

Amid ongoing tariff-related uncertainty, gold has reached new historical highs not only in US dollars but also in Swiss francs. It is benefiting from expectations of economic decoupling between the US and the rest of the world, as well as from the weakness of the US dollar. This performance also reaffirms gold’s status as a safe-haven asset in an environment marked by elevated uncertainty.