Experts from Vanguard Predict Continued Financial Market Turbulence
The high market volatility affecting financial markets worldwide will continue with the same intensity for at least the next 90 days, after which President Donald Trump will revisit tariff negotiations, according to Vanguard experts.
Rafael Rodríguez’s Analysis
Rafael Rodríguez, Vanguard’s Investment Strategist, stated that we will see “how tariff negotiations conclude and how agreements with China shape up within the next 90 days.”
- If Trump imposes an average tariff of 60% on China and 10% on the rest of the world, US growth would be between 1% and 1.5%, with inflation at 3-3.4%. This is far from the Federal Reserve’s target of 2%.
- Should China’s tariff level remain at 145%, US growth would be less than 1%, and inflation could reach 4%.
- Despite this, Rodríguez believes the Federal Reserve might lower its reference rate this year.
Market Performance and Recommendations
Stock market indices have experienced a downturn, with US indices being the most affected. The Dow Jones has dropped 6.81%, Nasdaq by 11.05%, and S&P 500 by 7.27% since Trump’s return to the White House on January 20.
During a volatility presentation, Rodríguez advised maintaining discipline and clear investment objectives in financial markets due to ongoing short-term uncertainty and complex market conditions.
“It’s surprising that we’re only in April and already seeing movements of nearly 10% up or down across all stock market indices,” he commented.
Ignacio Saralegui’s Perspective
Ignacio Saralegui, Vanguard Latin America’s Portfolio Solutions Head, emphasized the importance of diversifying risk in markets by having exposure to Latin America within emerging markets.
“We should enjoy diversification; some economic sectors may struggle, but others will thrive. Volatility presents an opportunity. Markets respond to typical market conditions, rising and falling, not just due to a president’s actions, as there is a significant global context,” he explained.
Key Questions and Answers
- What is the expected duration of high market volatility? Vanguard experts predict at least 90 days of continued high market volatility.
- What are the potential impacts of tariffs on US growth and inflation? An average 60% tariff on China and 10% on the rest of the world could result in US growth between 1% and 1.5%, with inflation at 3-3.4%. Higher China tariffs (145%) could lead to growth below 1% and inflation reaching 4%.
- How should investors approach the current market conditions? Maintain discipline and clear investment objectives, as short-term uncertainty and complex market conditions will persist.
- Why is diversification in Latin American markets recommended? Diversifying risk through exposure to Latin America within emerging markets can help investors capitalize on opportunities presented by market volatility and benefit from various economic sector performances.
