Publication date: April 10, 2024

Via the media, the world has been inundated with terms such as import tariffs, trade barriers, and trade war since Wednesday, April 2, 10 p.m., Dutch time. Rightly so, because Mr. Donald Trump is living up to his image by shaking up the world with his global trade policy. He is cooking the soup very hot and going in with two stretched legs by imposing hefty import tariffs on as many as 185 (out of 196) countries. In addition, much remains unclear as to details and duration. The result was panic and hysteria in all financial markets. Briefly, this is today's starting position and is considered familiar. In this article, we discuss the expectations for the stock markets and how to deal with special situations as they currently occur.

Stock markets: an overview in view

Due to the historically rapid and fierce decline in stock markets, expectations and technical patterns need an immediate update. Remarkably, almost all leading stock indices and individual stocks give the same new expectation in our algorithm.
Thereby, the US import tariffs have consequences for global trade and equity markets. We, therefore, choose a chart of the MSCI World Index and put the current situation in perspective over the past six years.

You can see that corrections are always well followed by nice rises. The current 25% decline is historically bright and thus has characteristics of the panic surrounding the 2020 COVID crisis.


What is the expectation of the stock markets?

Macro figures and corporate figures notwithstanding, for now, everything revolves around the development of the possible final trade war. We expect that the leaders of world economic powers, such as the U.S. and China, will continue to bicker over trade terms for a while longer. No one wants to just give in and easily water down. This will result in a period of large price moves within a wide range. This is the riskiest market for investors.

The current situation of bombarding each other with measures will also culminate during this period, resulting in another panic sell-off in the stock markets. In other words; the correction in the equity markets is not yet over but will have to undergo another final decline.

The expectation is that, ultimately, the soup will never be eaten as hot as Mr. Trump has served it up. There will eventually be "deals" with China and the EU. The market has clarity and can continue the long uptrend.

For the MSCI World Global Index, we plotted the following scenario in the chart of the IShares MSCI World ETF:

In the case of the IShares MSCI World ETF, this is between $80 and $95.This period ends with a final low at $71 to then goes up hard. This period ends with a final low at $71 to then goes up hard.

Note that this scenario is also preferred for the AEX, Dow Jones, DAX, Nasdaq!


How to handle the current situation in the stock markets most wisely

Experience shows that volatile markets with a wide price range are not suitable for private investors to trade in. Of course there are opportunities but the risk is far too high and will eventually lead to disappointment. Investing is a matter of patience and timing .
We offer for your consideration not to trade at all for the time being (patience). This sounds boring but is the wisest thing to do if you are not an experienced professional trader.

Do watch the price of your favorite index or stock every day. If the close goes below the current low (AEX 784, DOW 36400, etc) the timing becomes important. The expectation is that from breaking through at the close below the current low, the price can drop another 8-10%. This usually happens in a panic. The optimal timing would then arise at AEX 710.

If you are a more calm and cautious investor, you might consider letting the whole storm blow over. The decline is, according to our system and belief, an interim correction. Once calm has returned and the markets show a healthy upward trend again, at that point you can consider taking positions or expanding. The long-term trend is up.

Good luck!

Disclaimer: Investing involves risk. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are, therefore, for educational purposes only.