Six Key Factors That May Influence a Market Rebound or Further Downturn
The markets have been on a rollercoaster, what could cause them to stabilise – or fall further.
Markets remain volatile, swaying sharply in response to Liberation Day developments. After three consecutive days of declines, we’ve seen sudden rebounds and continued swings, reflecting the heightened uncertainty.
With Trump’s unpredictability, it’s difficult to forecast where markets go from here. However, there are several potential catalysts that could spark a rebound — and others that might push markets lower.
It’s important to stay calm in times like these. Volatility is part of investing, and taking a long-term approach is often more effective than trying to time the ups and downs. Riding out downturns has historically been the most successful strategy.
What could support a market rebound?
1. A longer pause on tariffs
The 90-day pause announced on 9 April gave governments time to negotiate and prepare. If this window is extended, markets may respond positively, viewing it as a sign of diplomacy gaining ground.
2. New international trade deals
Should foreign governments strike tariff-lowering agreements with the US, investors may interpret this as the beginning of a broader de-escalation, lifting sentiment.
3. Federal Reserve intervention
While the Fed is typically cautious, it has a history of stepping in decisively during crises — as seen during COVID-19. If volatility escalates significantly, the Fed could step in to support markets, offering reassurance through what’s often referred to as a “Fed put.”
However, the recent rebound suggests we’re not yet at that point. Still, unusual activity in bond markets — particularly a sharp sell-off in 30-year Treasuries on 9 April — is raising eyebrows and may point to deeper concerns, such as recession fears or declining foreign investor appetite for US assets.
What could drag markets down further?
1. Retaliatory tariffs escalate
The US’s decision to raise tariffs on China to 104% shocked markets, especially as it could render many Chinese exports unviable. If more countries face similar treatment, market volatility is likely to intensify.
2. Negative economic data starts to show real-world impact
If upcoming data reveals that Liberation Day is denting business activity, consumer confidence, or employment, markets may react sharply. Hard data confirming economic strain will be difficult to ignore.
3. Elevated bond yields persist
Rising yields — like the 30-year US Treasury briefly hitting 4.516% on 9 April — mean falling bond prices. If borrowing costs stay high while the economy slows, central banks will be caught between controlling inflation and supporting growth. This policy dilemma creates further uncertainty — something markets dislike most.
While there’s plenty of noise, the best approach remains grounded in long-term planning. Short-term shocks, however dramatic, often give way to recovery — just as we saw in the aftermath of COVID-19.
Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.