As President Donald Trump‘s tariffs obliterates the global markets, an expert is warning of a “perfect storm” brewing, urging investors to prioritize liquidity, reliable fixed-income instruments, and gold to weather the impending turbulence.
What Happened: Julia Khandoshko, CEO at European broker Mind Money, paints a grim picture of the interconnected global economy, arguing that the escalating trade war triggered by Trump’s tariffs threatens to destabilize markets worldwide.
She advises that this is not the time to make money, but the time to preserve capital in conditions of high uncertainty. “The most rational strategy in the short term is to focus on liquidity, reliable fixed-income instruments, and safe haven assets such as gold,” she adds.
“Compared to the 2008 crisis, today’s economy has become much more interconnected,” Khandoshko warns. “This means that in the event of a large-scale trade war, no country will stand aside. Even if someone manages to get a short-term benefit, everyone will suffer in the long run. Trade wars do not create winners — they only increase instability and cause a chain reaction.”
Khandoshko cautions against complacency, even for countries with a positive trade balance. She highlights the risk of stagflation, a scenario where economic growth stagnates while price pressures persist, citing Japan’s prolonged economic struggles as a cautionary tale.
According to her, the primary concern is the overestimation of predictability and control in an increasingly complex global system. “The main risk at the moment is overestimating the ability to predict and control the consequences,” she warns. “The illusion of control can lead to mistakes when the system becomes too complex.”
Why It Matters: Adding to the growing concerns, the liquidity issue has already started surfacing in the U.S. market. The 3-year SOFR swap spread, a key indicator of liquidity in the U.S. banking system, has been widening significantly.
SOFR is a benchmark interest rate that reflects the cost of borrowing cash overnight, and it is used as a reference rate for various financial transactions. Whereas, the SOFR swap spread is the difference between the fixed rate in a SOFR-based interest rate swap and the yield on a government bond of the same maturity.
According to Cathie Wood, the founder, CEO, and CIO at Ark Invest, this crisis needs to be solved via a trade agreement and through aggressive intervention by the Federal Reserve. She underscores the severity of the situation by adding that there is "No more time to waste".
As of Tuesday, the Nasdaq 100 has been in bear market territory, having fallen 23.10% from its prior peak of 22,222.61. The S&P 500 also saw a significant decline of 18.95% from its Feb. 19 high of 6,147.43, while the Dow Jones was down 16.48% from its 52-week high.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, were lower in premarket on Wednesday. The SPY was down 0.63% to $493.33, while the QQQ declined 0.28% to $414.88, according to Benzinga Pro data.
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