rewrite this title and make it good for SEOAnalysis-High-priced stocks and bonds raise tariff threat for markets

“Things have settled down but not in a positive way,” Amundi’s head of global macro Mahmood Pradhan said.

“The effective tariff rate for all imports coming into the U.S., if you calculated an average across the board, would be about 15%,” he said. “This is broadly negative for growth in every country that is involved in world trade.”

The World Bank last month cut its global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.

With so much uncertainty hanging over U.S. assets, investors’ cash has flowed elsewhere for much of this year, into the likes of European stocks and bonds, gold, Chinese tech stocks or emerging market currencies.

Greasing the wheels of the stock market rally has been anticipation that Fed Chair Jerome Powell will cave to pressure from Trump to deliver a rapid string of rate cuts.

Yet the data has been too strong to justify an aggressive loosening of monetary policy and too soft to argue that tariffs are having no effect. U.S. employment figures show the economy is still creating jobs at a firm clip, while business activity surveys show factories and services are flagging.

In the meantime, Trump’s landmark tax cut and spending bill will add an extra $3.3 trillion to the national deficit.

Benchmark 10-year U.S. Treasury yields (^TNX) have retreated from January’s 15-month peaks at 4.8% to 4.35%.

“Bonds are much more focused on growth (falling) than on inflation so when you see an upturn in trade war announcements bond yields tilt towards lower growth and rate cuts. But equities are emboldened because tariffs haven’t shown up in the inflation numbers yet,” Joost van Leenders, senior investment strategist at Dutch asset manager Van Lanschot Kempen, said.

“We don’t think this can continue,” he said, adding he remains neutral on equities, with a small overweight position in government bonds.

Gold (GC=F) has staged a blistering 26% rally this year, topping $3,300 an ounce, serving as a hedge against macro and geopolitical uncertainty, as well as an alternative to the dollar, the biggest tariff casualty, which has lost over 10% in value this year against a basket of currencies .

Kevin Thozet, investment committee member at French asset manager Carmignac, said he is hedging against a fall in the U.S. stock market, but believes this is unlikely right now because retail traders are diving in to buy market dips.

Further out, he said Trump’s tax cut bill might offset some of the impact of tariffs, but the extra debt it could take to fund those cuts could drive the 10-year Treasury yield to 5% in the coming three months, a level that policymakers worry about given its impact on households, companies and the government.

“We see significant cracks in U.S. markets, even though the Fed has ample room to cut,” he said.

(Reporting by Amanda Cooper and Naomi Rovnick; Editing by Elaine Hardcastle)