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Market volatility has decreased significantly, with stocks reaching all-time highs despite escalating trade tensions caused by Trump’s recent tariff threats.
The Vix index, which measures short-term volatility in the S&P 500, is currently at 16, well below its average of 20. Similarly, volatility in the US government bond market is at its lowest point in three years.
Tech stocks, led by Nvidia, have surged, with the chipmaker achieving a historic $4 trillion valuation.
Despite Trump’s recent tariff announcements, including tariffs on copper and pharmaceuticals, investors are less concerned than before. They believe that the president may backtrack on tariffs that could harm US economic growth.
Investors have even coined the term “Taco” to describe this phenomenon, standing for “Trump Always Chickens Out.”
The currency markets have also remained relatively calm, with expectations of swings in exchange rates decreasing significantly since April.
However, some investors caution that the optimistic sentiment in the stock market could embolden Trump to escalate trade tensions further than expected.
With US equities at record highs and valuations stretched, there are concerns about a potential market correction due to the ongoing trade disputes.
Overall, while the markets have taken a relaxed view on the current trade situation, some investors are wary of the lack of concern regarding potential risks.
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