The second part of 2025 has arrived

Hope springs eternal from the human breast, but it doesn’t make for a good investment strategy. Stock markets across the world continued to tumble this morning as people absorbed the full import of the new US tariffs. Hopes that quick negotiations with the US would follow have been dashed. “An index of European banking shares fell 4.8%, falling more than 20% from recent closing high and leaving it on course to confirm it is in a bear market,” writes Reuters. “Together with the losses over the past two trading days, the index had fallen by more than 18% on Monday. German banks Commerzbank and Deutsche Bank, French lenders Credit Agricole and Societe Generale, and BNP Paribas were all down between 9% and 10%. Britain's Barclays was down 9% and HSBC dropped around 5%.” On the US: “Banks' shares extended their declines from Thursday. The industry has been clouded by fears that a trade dispute could temper consumer confidence, reduce spending, weaken loan demand and pressure fees from advising on deals. JPMorgan Chase, the biggest U.S. bank by assets, sank 7%. Wall Street titans Goldman Sachs and Morgan Stanley dropped more than 7% each.” Goldman Sachs now expects to see a recession: “If most of the April 9 tariffs do take effect, then the effective tariff rate will rise by an estimated 20pp once those increases and likely sectoral tariffs take effect, even allowing for some country-specific agreements at a later date. If so, we expect to change our forecast to a recession.” Even if some of the measures are rolled back, confidence has been badly shaken.