Between unpredictable sheriffs and tariff shootouts, markets are turning into a Western. The only question now: who’ll fire the next shot?
In recent weeks, financial markets have felt like a scene straight out of a modern Wild West: unpredictable, volatile, and governed by no clear rules. Every time I glance at my Bloomberg screen, I hear that iconic theme from The Good, the Bad and the Ugly — that haunting two-note coyote call, answered by an echo echoing through digital canyons. So let’s cue Ennio Morricone and his legendary soundtrack to accompany this market standoff.
Unless you’ve been wandering the desert, you’ve probably noticed that equity markets have taken a beating. Daily swings have reached levels unseen since the COVID crisis. Normally, even for finance professionals, pinpointing the cause of such turbulence is tricky — the result of millions of interactions, now largely steered by algorithms (nearly 60% of all trades).
But this time, the culprit seems clear: Sheriff Trump and his tariff revolver. The new trade measures he’s introduced have injected a hefty dose of uncertainty on two fronts: the potential impact of a trade war on the global economy, and the direct consequences these tariffs could have on the U.S. economy itself.
The story’s similar elsewhere: from commodities to crypto, red is the dominant color. Which brings us to the big question — how much deeper could this go?
Let’s begin with the obvious: investors are already struggling to grasp the full impact of the tariffs. Add to that the rapid-fire pace of news, and markets become even more jittery. As long as this continues, a return to calmer waters is unlikely. The situation is reminiscent of the COVID shock — sudden, global, and exogenous. But if we learned anything from that crisis, it’s that once investors adjust their expectations — even at the cost of some growth — a new normal emerges, and markets eventually find their footing again. Right now, we’re in a phase of profit-taking in the face of uncertainty.
There’s also upside risk: information that markets haven’t yet fully priced in, which could spark a rebound. The real judge remains the economic data. As long as the fundamentals hold, there’s no reason to panic.
Meanwhile, the political tide may be shifting. Trump, until now unchecked, is facing growing resistance — both abroad and at home. That shift in tone could force him to scale back his ambitions.
Governments may also roll out stimulus measures, and central banks — stuck in a delicate balancing act — might be compelled to step in and support markets, even if it means sidelining their inflation-fighting goals for a while.
But not all central banks are equally armed. To borrow a line from the film: “The world is divided into two kinds of people — those with loaded guns and those who dig.” The Fed still has ammunition. By keeping rates relatively high, it has room to cut if needed. The ECB does too, though to a lesser extent. But the Swiss National Bank? It’s more on the digging side. With rates already at rock bottom, deflationary pressure, and a franc that just keeps strengthening, its hands are tied.
So yes, there’s a plausible path back to stability — even if the trade conflict escalates. But we’d be naïve not to consider what could go wrong. A mild correction can quickly spiral into something worse if key dominoes start to fall: a shock to the banking system or a disruption in the bond market. The U.S. debt market — especially Treasuries — is the backbone of global finance. It underpins liquidity, supports the monetary system, and influences the cost of capital worldwide. It’s a giant that shouldn’t be disturbed. But Trump’s actions are starting to rattle it. Let’s hope he knows when to holster his weapon — because if not, the fallout could be severe.
To sum up: even if the trade war heats up, markets may find their footing once the initial shock passes — especially if certain factors spark a rebound. But let’s keep a close eye on the bond market. In this financial Wild West, it’s crucial to know who’s got the gun, who’s digging — and most importantly, when to step into the frame.