Trade Tensions and Tariffs Loom But Markets Hold Firm

President Trump ramped up pressure by confirming 30% tariffs on imports from both the European Union and Mexico, effective 1 August. This move came after earlier talks broke down and followed earlier tariff warnings to a broader group of trading partners. 

In response, the European Union warned the tariffs would “make current trading conditions almost impossible”, as voiced by EU Trade Commissioner Maroš Šefčovič. While the EU has delayed immediate retaliation, it is preparing countermeasures in case no deal is reached by the deadline. 

Meanwhile, Mexico criticised the decision as “unfair treatment,” though President Claudia Sheinbaum struck a more diplomatic tone, expressing cautious optimism that revised terms could still be agreed upon. 

The escalation in tariff announcements may fuel headline-driven volatility, but markets appear to be pricing in more rhetoric than reality at this stage. 

If 1 August passes without revised trade deals, retaliation from the EU or Mexico could reignite risk-off sentiment. Investors should monitor European industrials and global exporters. 

The S&P 500 edged up 0.3%, while the Nasdaq gained 0.4%, buoyed by strong Q2 earnings from Johnson & Johnson, PepsiCo, and TSMC. 

Market sentiment improved mid-week following better-than-expected retail sales and jobless claims data, which helped ease investor concerns. However, Tesla remained under pressure due to renewed worries about distractions surrounding Elon Musk, weighing on broader tech sentiment early in the week. 

Speculation about Powell's potential dismissal was largely shrugged off by investors, particularly after the White House clarified that no immediate action was planned. 

Meanwhile, in the UK, the FTSE 100 gained around 0.5%, touching a multi-week high. It was boosted by strong results from Ocado and mining firms. 

Cooling UK labour market data increased market conviction of an August rate cut by the Bank of England. And overseas investors showed renewed interest in undervalued UK stocks, with foreign inflows starting to pick up. 

In Europe, the STOXX 600 rose 1.5%, rebounding from earlier tariff-related jitters. Strong results from industrial giants such as ABB, Siemens, and Legrand led sector gains, providing a solid boost to the index. 

Lower exposure to tech and strength in cyclical sectors like banks and industrials helped the region absorb broader global volatility. While trade tensions with the U.S. remain a concern – particularly following Trump’s 30% tariff announcement – there was no immediate market selloff in response. 

Asia-Pacific equities delivered a mixed performance as trade headlines and regional inflation data drove short-term market movements. In Japan, the Nikkei 225 rose 1.3%, buoyed by a tech sector rebound and a weaker yen ahead of upcoming elections. 

Chinese markets remained range-bound, with investor sentiment cautious despite ongoing stimulus pledges from Beijing. Meanwhile, South Korean and Taiwanese chipmakers rallied on the back of strong earnings and improving global demand for semiconductors. 

Emerging markets also found support, helped by a softening U.S. dollar and sustained commodity demand. Latin American equities, particularly in Brazil and Mexico, attracted inflows despite lingering trade-related risks. India and Southeast Asia remained resilient, underpinned by domestic growth optimism, although some currency pressures persisted across the region. 

The graph below shows the significant impact that missing the best-performing days in the S&P 500 each year can have on long-term returns. 

Using data from 1950 onwards, it compares the annualised returns of a fully invested portfolio against scenarios where an investor misses the best days of the market each year. 

An investor who remained fully invested throughout the period would have achieved an annualised return of 8.2%. However, missing just the single best day of each year reduces that return sharply to 4.7%. 

The consequences of missing more days are even more pronounced: missing the five best days per year results in an average annual loss of 4.3%, while missing the ten best days each year leads to a deeply negative annualised return of -12.2%. 

This highlights how quickly returns deteriorate when investors attempt to time the market and miss these crucial days. 

Despite the temptation to exit during periods of uncertainty, the data strongly suggests that staying fully invested is essential to capturing the market’s long-term growth. 

U.S. Treasuries rallied after Fed Governor Christopher Waller signalled support for a July rate cut, citing easing inflation and stable jobs data. 

The two-year yield fell to around 4.1%, and the 10-year dropped below 4.3%, reversing earlier spikes. Short- and intermediate-duration bonds outperformed as investors positioned for policy easing. 

Corporate bonds, both investment grade and high yield, performed well. Credit spreads narrowed slightly, with high-yield funds seeing a third week of net inflows, reflecting growing risk appetite. 

In the UK, gilts gained as softening wage and employment data raised hopes of an August rate cut from the Bank of England. The 10-year gilt yield dipped below 3.9%, while GBP corporate debt attracted renewed interest. 

Eurozone bonds held steady, with Italian and Spanish debt outperforming on carry trades as ECB tightening expectations eased. 

Overall, fixed income markets are pricing in a friendlier rate environment, with policy headlines viewed as short-lived noise against a supportive macro backdrop. 

Gold prices edged lower late in the week as a stronger U.S. dollar and upbeat U.S. economic data reduced safe-haven demand. 

While recent trade tensions have supported gold, firmer macro data suggests any rally may be capped near record highs. 

Meanwhile. silver surged to around $39/oz, marking a 14-year high as heavy industrial demand – especially in solar and electronics – and ETF inflows drove gains, boosted further by supply constraints. 

Silver is increasingly valued as both a commodity plays and safe-haven asset, especially in green energy and economic recovery themes. 

Oil prices rose by between 1% and 1.5% as supply disruptions from drone strikes in Iraqi Kurdistan, lower inventories and Middle East geopolitical tensions underpinned prices. 

The rising geopolitical risk supports oil prices, although U.S. tariff uncertainties could weigh on global demand.

Bitcoin surged past $120,000 to hit fresh record highs this week, reaching around $123,000 mid-week, as renewed investor optimism. 

This was fuelled by the U.S. House of Representatives advancing key crypto legislation, including the GENIUS Act – which brings more clarity on stablecoins and legitimises crypto as a means of holding and transferring money. 

Record-breaking inflows into spot Bitcoin ETFs drove the rally. Global net inflows reached approximately $4 billion last week, the highest so far this year.  

These inflows reflect growing, though still nascent, institutional adoption – pension funds, sovereign wealth and hedge funds are participating, alongside strong retail momentum. 

Market strategists describe Bitcoin as “digital gold” – acting as portfolio insurance during turbulent macro environments. 

Crypto appears to be becoming more mainstream and it could be an interesting asset class moving forward, although it should not be solely relied upon. As ever, diversification is key.

While the headlines continue to be dominated by trade tensions, political noise and geopolitical risks, markets have shown remarkable resilience. 

At Hoxton Wealth, we understand that market noise can be unsettling, but navigating these fluctuations is central to achieving long-term financial goals. 

Our advisers are here to provide personalised guidance, helping you stay disciplined, diversified, and aligned with your investment strategy. 

If you have any concerns about your portfolio or simply want to ensure your plan remains on track, don’t hesitate to reach out to your Hoxton Wealth adviser. 

Our client services team is here to support you – they can be reached by email at client.services@hoxtonwealth.com or on WhatsApp through our new global client services WhatsApp number: +44 7384 100200 

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