In a year marked by relentless market swings and a sense of financial whiplash, investors are searching for clarity amid the chaos. Deutsche Bank strategist Henry Allen believes that, despite the barrage of headlines about tariffs, geopolitical tensions, government debt, and rising Treasury yields, investors should focus on just two pivotal risks, according to a report in MarketWatch.
The first major event on Allen’s radar is the looming July 9 deadline, which marks the end of a 90-day extension on reciprocal tariffs imposed by President Donald Trump. The uncertainty surrounding these tariffs has left markets on edge, with Allen emphasizing that the outcome will have a direct impact on the cost of goods and could ripple across industries, from manufacturing to commercial real estate.
President Trump has indicated that, within weeks, letters will be sent to European Union countries detailing their new unilateral tariff rates, signaling a take-it-or-leave-it approach to trade negotiations. This move stands apart from the hefty 50% levies already in place on steel, aluminum, and other EU goods.
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The second risk Allen highlights is inflation, which could be further fueled by tariffs and exacerbated by potential oil shocks stemming from instability in the Middle East. While some might hope these are temporary disruptions, Allen warns that recent history has shown how so-called “temporary” shocks can quickly become embedded in inflation expectations, making them feel like a permanent fixture of economic life. The Federal Reserve’s continued reluctance to cut interest rates adds another layer of uncertainty; if inflation surges, the central bank might even be compelled to raise rates, risking a slowdown in economic growth.
Allen also addressed why markets have remained relatively calm in response to Israel’s recent strike on Iran, which was aimed at curbing nuclear ambitions. He cautioned, however, that if the Strait of Hormuz were to be closed—cutting off a critical artery for global oil shipments—oil prices could skyrocket above $120 a barrel, delivering a powerful inflation shock to the global economy.
In a year when the news cycle rarely lets up, Allen’s advice is clear: keep your eyes on the July 9 tariff deadline and the ever-present threat of inflation. These are the forces most likely to shape the investment landscape in the months ahead.
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