Software Index

State of the Market

The past is prologue. The trade war is on. The future is…?

Markets usually set their eyes on the recent past — quarterly earnings, deal volume, price trends, etc. But a fundamental readjustment is underway as we attempt to discern just where to look in a more distant history. Which past can help guide us in the present? What past events mirror our present circumstances? Which historical patterns might predict our future?

These questions are top-of-mind for investment professionals around the globe as they consider the facts of the present: Trade ties are being fundamentally shifted, USA uni-polar dominance is threatened by the rise of China, semiconductors and data have become the currency of AI, post-WWII alliances are evolving, and tariffs are being used to leverage the influence still retained by the 20th century’s great financial power.

This unique combination of facts has no direct historical parallel. Yet in markets, where we must value future outcomes based on present information, we seek coherent answers to these complex questions. History doesn’t repeat, but it does rhyme. We just need to discern if it will rhyme with “regression” or with “health”.

Through April 2, market signals were leaning positive. Q1 deal volume reached its highest level since 2022, non-farm payrolls increased by 228,000 (exceeding expectations), and March CPI decreased 0.1% (also better than expected).

However, new tariff announcements overshadowed these positive trends. Both equity and debt markets responded with selling pressure, and bond market concerns intensified as long-term yields rose. Relief came when the administration announced a 90-day pause on severe tariffs, along with exemptions for critical goods and openness to negotiations during this period.

China remains the notable exception, where trade tensions have escalated dramatically with the USA. Both nations have engaged in retaliatory measures, pushing tariffs above 100% on numerous goods.

The formation of the 21st century trade regime may be upon us and we are all looking for the clues to the conclusion. Will protectionist tariffs become standard, or will negotiations forge a more open trading system adapted to an era of Great Power competition? Only time will tell.