Business News

Arnab Das, Global Market Strategist-EMEA, Invesco, says the global economy is predicted to become more fragmented with varying cycles, prompting capital reallocation from the US to Europe and Asia. This shift will occur gradually, necessitating a holistic portfolio review across geographies, sectors, and asset classes. While retaliation from China is underway, the primary short-term risk remains a potential recession.Trump's new tariff blitz has triggered the synchronized global sell-off. The S&P and the Nasdaq both are in free fall, the EU is threatening countermeasures, UK leaders are pledging industrial bailouts. Even as we are hearing murmurs about Trump giving a reprieve of 90 days, do you think Trump has just launched this global economic war?Arnab Das: We have to take him very seriously and literally on much of this agenda. It is good news that India is moving to liberalise and try to have a deal with the US and that Europe is talking about zeroing out some tariffs. That will move things in the right direction and meet Trump, let us say, something like halfway on the 90-day pause. But the big thing here is that some countries are going to negotiate and some countries are going to retaliate. It is going to be hard to see how this turns into a complete go back to the status quo ante. It is more likely that we get a lot of cross currents that lead to more changes country by country in economic relationship with the US in financial market performance and that we are going to have a much more disjointed world economy with different cycles and different trends even if there is this 90-day pause. I do not think we are going to go back to the status quo ante any time soon. This is not going to go on endlessly, it has to end and the markets are going to be back in action. I do not know if you agree with that but there are recession risks and they are back on every strategist’s dashboard. Is this how recessions begin because the US is weaponizing trade and financial markets are reacting very violently. Policymakers across Europe and the United Kingdom seem to be scrambling. Are we underestimating the global ripple effect or would you say this is going to be a short-lived affair and markets will be back?Arnab Das: The truth is going to be somewhere in between. Maybe the extremes of all of this are not going to last that long. After all, we have just had a 90-day reprieve. I agree pharmaceutical is going to be exempt and there are going to be measures taken to make sure that there is not a complete bloodbath in the economy, but we cannot get away from the fact that the Trump administration is radically changing the US position in the world, with respect to Europe and with respect to Asia and in many dimensions of which trade is only one. Is this the way that recessions get started? Well, this is the way that this recessionary fear and this recessionary pressure is getting started. Of course, most recessions are started by the Fed as it tightens in order to restore price stability and that is how you normally get a recession from the demand side and through monetary policy. In this case, you are getting a regulatory onslaught through trade policy and to some extent, the Fed can help cushion the blow when the growth shock hits. Even if there is some inflation pressure which is likely, the Fed and other central banks can help to cushion that blow because there will also be a growth shock. Some of this is going to be recessionary, some of it is going to be inflationary. So, put the two of those together because it is also affecting the supply side and is going to be stagflationary and that is very difficult to deal with. The only silver lining here is this idea that these radical actions help to open up bilateral trade some more between US and other countries and between third countries. We see India trying to negotiate with the US and strike a deal there that would work for both sides and also the EU responding with this together with India to try and strike out to change the parameters of negotiations. That is the silver lining but the cloud is still there. We are still going to have this challenge with us for some time to come. There is kind of a sense that the US is much more unilateralist, much more unreliable, much less credible than it has been. Maybe some of that can be restored but not all of it, I do not think because we have had such a series of shocks not just in the trade arena but also in the geopolitical arena. People who run the European Union are going to have to be more self-reliant than they have been. In this kind of scenario, what will the Fed do? The Fed chair says the trade war impact is bigger than anticipated. Could this force a pause or a pivot in monetary policy?Arnab Das: Look, they have to wait and see how the dust settles and over time they will cut. The market is obviously pushing them in the direction of sharper cuts rather than waiting and seeing. It could be the case that if a lot of tariffs do go through that, you get some measured inflation pressure but you also get a big growth hit and so over time the Fed will end up cutting and delivering cuts, maybe not quite as many and as quickly as priced in because they are still going to be concerned about inflation expectations of the public. Bond market inflation expectations continue to be well anchored but that is only one part of the story. University of Michigan survey inflation expectations are rising. That is a challenge and if that continues with these very high tariffs and the effort of some companies to pass on those tariff increases, it is going to be potentially one or a few off push to the inflation rate. It is a big consumption tax, and eventually consumption is going to take a bit of a hit from that and then the Fed will be in a better position to cut more clearly and more aggressively. Do you subscribe to that view? Would you call that being a braveheart from the investor's lens? What should be the strategy according to you? Should you sit tight? Should you average down? Should you exit and then wait? What would be your strategy advice?Arnab Das: I would be waiting for the dust to settle a little bit. You have different parts of the world going to react to all of this differently. Right now, there is a lot of dislocation everywhere. But the big picture here is that the US wants to rebalance away from consumption, towards investment, towards exports to some extent. Europe, therefore, is going to respond by boosting domestic demand, spending more money through the government. China is going to try and do the same, maybe to some extent boost consumption. As a lot of trade deal efforts all over the shop unfolds, what you are going to see is people reallocating capital accordingly, maybe a bit out of the US, maybe a bit into Europe, maybe a bit into Asia, maybe a lot less concentration in the US and a shift in market leadership. It is not all going to take place in one day or one week. It will be over time. So, it is a big shock. You want to take a step back and think about your portfolio in a holistic sense, geographically as well as sector-wise and asset class-wise. Take it slow and resist the urge to jump in because there is a lot of dislocation or on the other side of it, completely liquidate as well…. So, what would you say is the biggest risk? Is it recession or is it retaliation right now?Arnab Das: The biggest risk in the very short term is recession. Retaliation is already taking place with China, but the big risk in front of us is recession.

The Trump administration’s threat of massive new tariffs has sent Apple Inc.’s share price plummeting, but it also brought a short-term benefit: customers rushing to retail stores to buy iPhones. Employees from different Apple locations across the country said stores filled with customers over the weekend — with the shoppers expressing concerns that prices will climb dramatically after the levies are imposed. Most iPhones, Apple’s best-selling and most important product, are manufactured in China, which is in line for tariffs of 54%.One employee said their store was slammed with people panic-buying phones: “Almost every customer asked me if prices were going to go up soon,” said the worker, who asked not to be identified because they weren’t authorized to speak publicly.Though stores didn’t necessarily see the kind of lines that come with an iPhone launch, the atmosphere was like the busy holiday season, employees said. “People are just rushing in worried and asking questions,” one said, adding that the company hasn’t provided guidance to stores on how to handle such inquiries. The frenzy has translated to more purchases. Apple’s US retail stores saw higher sales over this past weekend than in prior years in at least some major markets, according to a person with knowledge of the matter. An Apple spokesperson declined to comment.Apple will report its fiscal second-quarter results on May 1, giving Chief Executive Officer Tim Cook and Chief Financial Officer Kevan Parekh an opportunity to discuss the effect of expected tariffs. During the holiday-quarter conference call, Cook said the company was assessing the impact but wouldn’t comment further.The stock market’s tariff meltdown has hit Apple especially hard. The company’s valuation fell by more than half a trillion dollars in the final two trading days of last week, and the stock suffered its worst three-day rout since the aftermath of the dot-com bubble in 2001.The company has been taking steps to prepare for the tariffs, including stocking up on inventory. In a bid to reduce the toll moving forward, Apple is steering more devices made in India to the US market, Bloomberg News has reported. The country is currently set to be taxed at a lower level than China. Apple also has spent years shifting more of its production to Vietnam, which will have a slimmer tariff than China. The company has manufactured Apple Watches, Macs, AirPods and iPads in that country. It also produces some Mac models in Ireland, Thailand and Malaysia. Apple’s flagship retail store on Fifth Avenue in New York was busy Monday afternoon. Ambar De Elia, a Buenos Aires native, is visiting New York and was already planning to get an iPhone 15 for her younger sister. But when she woke up this morning and saw the news about Wall Street, she thought now was the best time to splurge.Analysts and industry watchers have been trying to gauge the impact of a 54% China tariff on prices, with some speculating that iPhones could soon cost thousands of dollars apiece.In reality, Apple is likely to take a number of steps — including squeezing its suppliers and putting up with lower margins — to keep prices from soaring, Bloomberg News has reported. Apple’s latest flagship iPhone currently starts at $999 — a level that has remained constant since 2017.“I think everyone is here because of the fear, they don’t know what’s going to happen,” De Elia said. “If we have the possibility to buy something at a lower price of course we are going to.”One employee at the store said he wouldn’t be surprised to see the rush continue at stores over the next few days. Another worker noted that this is typically considered the off-peak season — new iPhones are released in September — but many customers are upgrading now.The surge could help bolster results in Apple’s third quarter, which runs through June. Since the company is selling the inventory it already accumulated, the impact from tariffs won’t likely be felt until the following quarter.