What kind of week will it be? Global stock markets brace for the "tariff storm," and U.S. Treasuries return to the spotlight

Investors are making final preparations for "April 2," as the stock market faces shocks and the bond market becomes a safe haven .

In the first three months of this year, global stock and bond markets have experienced severe fluctuations due to a series of tariff measures by Trump. But one thing has become increasingly clear: the US dollar as a safe-haven asset is wavering, and bonds are more attractive than stocks.

The Trump administration is expected to announce a series of so-called "reciprocal tariff" measures on Wednesday, which could likely become the next major blow to the market. According to Bloomberg economists' analysis, depending on the scale of the tariff measures, the US GDP could be impacted, and prices may fluctuate significantly in the coming years, especially considering the potential hefty tariffs on imports from certain countries.

Mark Malek, Chief Investment Officer at Siebert, stated:

"Inflation is rising, consumption shows signs of weakness, and consumer sentiment is declining, all stemming from the government's tariff policy."

"Everything is precarious, everything."

Overall Weakness in the Stock Market, Key Industries Such as Automotive, Electronics, and Pharmaceuticals Face Impact

Since the end of February, the US stock market has lost more than $5 trillion in market value.

In the US market, the automotive industry (including car manufacturers, parts suppliers, and dealers) remains at the center of tariff-related turmoil, especially after Trump announced a 25% tariff on imported cars last week.

Analysts believe that the "reciprocal tariff" policy may exacerbate the pain in the US automotive industry and could also target industries such as semiconductor chips, pharmaceuticals, and timber. In addition to automotive giants like General Motors, chip manufacturers such as Nvidia, AMD, and Intel will also be in the spotlight; pharmaceutical giants like Pfizer, Johnson & Johnson, Merck, and Bristol-Myers Squibb will also be exposed to risks.

In the European market, European automotive stocks have already been affected, with the STOXX Europe 600 Automobiles & Parts Index down about 12% from this year's peak.

Among them, German automakers are the focus, as they export more cars to the US than any other country, including some high-margin models from Porsche and Mercedes-Benz—according to Bloomberg estimates, automotive tariffs could wipe out about 30% of these companies' expected operating profits by 2026.

In the Asian market, Japanese automakers may also feel pressure from "reciprocal tariffs," as cars and auto parts are Japan's largest export products to the US. Notable stocks include Toyota, the world's largest automaker, and Honda, which derives significant revenue from North America.

Additionally, chip manufacturing giants like TSMC and Samsung Electronics are also in the market spotlight.

US Bonds Become a Safe Haven, Outperforming US Stocks This Quarter

Since the beginning of this quarter, US bonds have outperformed stocks, with a cumulative increase of over 2%, while the S&P 500 Index has cumulatively declined by about 5%—this is the first time since March 2020, during the COVID-19 pandemic, that stocks have fallen and bonds have risen within three monthsBarclays strategist Ajay Rajadhyaksha's team shifted their asset allocation view last week, favoring bonds over global stocks for the first time in "several" quarters, citing policy uncertainty as a downside risk to economic growth.

Jack McIntyre, portfolio manager at Brandywine Global Asset Management, stated:

"If the stock market falls further, it will tighten financial conditions... which is favorable for bonds. You'd better buy when it's weak."

The temporary return of the traditional correlation between stocks and bonds is good news for investors, benefiting the classic 60/40 stock-bond portfolio. Earl Davis, head of fixed income at BMO Global Asset Management, said in an interview:

"Since bonds currently offer 'real returns,' with yields above inflation, increasing their allocation in the overall portfolio is an ideal choice."

"Additionally, bonds provide downside protection in case of severe sell-offs in risk assets."

Notably, Federal Reserve Chairman Jerome Powell recently stated that the Fed will wait for clearer economic information from government policy changes and believes that any inflation caused by tariffs may be temporary. However, St. Louis Federal Reserve Bank President Alberto Musalem warned that policymakers should be cautious of the assumption that "such inflation is temporary."

Interest rate swap data shows that traders expect rate cut expectations to be fully priced in during the second half of this year, which may limit further gains in U.S. Treasuries.