Global stock markets whipsawed on Monday as investors digested new developments surrounding US President Donald Trump’s imposition of tariffs on Canada, Mexico, and China.
US stocks fell as markets reacted to the weekend’s news of 25% tariffs on goods from Canada and Mexico, along with new 10% tariffs on goods imported from China. However, some losses were pared back following news of a deal between Mexico and the United States to put the levies on hold for a month. But tariffs appear on track to be imposed on Canada.
The Morningstar Canada Index fell 1.13% Monday. the S&P/TSX60 lost 1.20%.
The Morningstar US Market Index closed 0.78% lower on the day. The largest losses were concentrated in the small-cap value corner of the style box, which fell 1.65%. Large-value stocks broke even by mid-morning but ended the trading day 0.18% lower.
Global Markets Fell Amid Flight to Quality
Dominic Pappalardo, chief multi-asset strategist for Morningstar Investment Management, says Monday’s market moves indicate investors are seeking safety and quality in the face of geopolitical uncertainty. “Nearly all equity markets moved lower today as a traditional risk-off trade seems to be developing,” he says. At the same time, “US Treasury bonds rallied, with yields moving lower across the curve in a typical flight-to-quality reaction and continuing the downward trend since mid-January.” The dollar also rallied as investors sought quality.
Automaker stocks have been hit particularly hard by Trump’s trade war salvos. Among US stocks, Ford F was down 0.65% and Tesla TSLA down 4.80% in mid-morning trading. The Morningstar US Consumer Cyclical Index shed 2.9%.
Global Markets Fell Amid Flight to Quality
Dominic Pappalardo, chief multi-asset strategist for Morningstar Investment Management, says Monday’s market moves indicate investors are seeking safety and quality in the face of geopolitical uncertainty. “Nearly all equity markets moved lower today as a traditional risk-off trade seems to be developing,” he says. At the same time, “US Treasury bonds rallied, with yields moving lower across the curve in a typical flight-to-quality reaction and continuing the downward trend since mid-January.” The dollar also rallied as investors sought quality.
Automaker stocks have been hit particularly hard by Trump’s trade war salvos. Among US stocks, Ford F lost 1.88% and Tesla TSLA lost 5.17%. The Morningstar US Consumer Cyclical Index shed 1.53%.
Meanwhile, the yield on the 10-year Treasury note climbed to 4.54% in early before retreating to 4.50%, but later gave up those gains. Perhaps more significant is the 30-basis-point move lower in Treasury yields this month. “Building uncertainty among investors is showing through in lower yields over recent weeks,” Pappalardo explains. Even as the new tariffs evolve rapidly, he thinks the most important question is their impact on the global economy.
Retaliation and escalation from targeted countries could extend the tariffs and trigger a global trade war, which could cause severe economic damage. On the other hand, swift concessions or agreements could mean tariffs are reduced or removed, limiting their damage. It’s too soon to determine which scenario might play out.
US Dollar Jumps Against Peso, Canadian Dollar, and Euro
The US dollar jumped against a basket of exposed currencies on Sunday, moving from MXN 20.68 against the Mexican peso to MXN 21.09 and from CAD 1.45 to CAD 1.47 against the Canadian dollar. Against the euro, the US dollar rose to EUR 0.98 from 0.97, approaching parity—a situation last seen in 2022.
Cryptocurrencies Shaken by Risk-Off Sentiment
Bitcoin fell to USD92,800 Monday (hitting a three-week low) before recovering to USD96,546, as fears of a trade war weighed on risk assets. This is a significant fall after the coin touched a record high of more than USD107,000 on Jan. 20, when Trump was sworn in as president.
The Global X Blockchain ETF BKCH saw one of the biggest falls Monday morning, dropping more than 7%. Smaller cryptocurrencies were also hit, with Ethereum dropping to USD2,459 from USD3,425 Friday night. The CoinDesk 20 Index, which measures the largest 20 digital assets by market cap, dropped about 20% over the previous two days. (Cryptocurrencies trade around the clock, including on weekends.)
James Gard contributed to this story.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
