Our base case is that the turmoil across financial markets in the wake of President Trump’s “Liberation Day” announcement will continue to stabilise. As such, we assume that most asset prices and the dollar will recover some ground, with equities faring best. But some of the damage to confidence – in particular in US asset markets and the dollar – may prove longer-lasting. The big picture is that the range of plausible outcomes has widened significantly and, compared to just a couple of months ago, the outlook appears more challenging for “risky” assets and, perhaps, government bond markets too.
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