Tariff-Inspired Tumble: Volatility Spike and Equity Markets

tariff-inspired tumble: Takada explained it this way Once the first wave of volatility has passed, global equity markets are likely to experience a spontaneous rebound, according to Market Watch. Contributing factors to such a relief rally could include expectations for a substantial rate cut by the Fed at the September FOMC meeting and stock purchases made by short-term contrarian investors. Macro strategist Masanari Takada, in a note on Tuesday, said Monday's tariff-inspired tumble played out as he expected, but he speculates that the volatility spike that Wall Street investors experienced, after President Donald Trump last Thursday announced 10% tariffs on China imports not already subject to trade duties, is nothing compared with what could be in store later this month or next. However, for the three reasons we spell out below, we would expect any near-term rally to be no more than a head fake, and think that any such rally would be best treated as an opportunity to sell in preparation for the second wave of volatility that we expect will arrive in late August or early September. At this point, we think it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk. We would add here that the second wave may well hit harder than the first, like an aftershock that eclipses the initial earthquake. (news.financializer.com). As reported in the news.