Wall Street Leads Global Rally Amid Trump Tariffs

Global markets have seen a significant rise, reaching levels not seen before from May, with Wall Street leading the way. In November, the MSCI global stock index rose 3,2%, while the S&P 500 rose 5,1%, driven by optimism about Donald Trump's policies and the continued advancement of artificial intelligence (AI). Forecasts point to further gains, with an expected 0,3% increase at the market open.

In Europe and Asia, results were mixed. Europe's STOXX index held on to modest monthly gains, while Asian markets faced declines on export concerns related to Trump's proposed tariffs. In the United States, stocks rose, boosted by expectations of economic resilience and promises of tax cuts and deregulation.

Trump's Tariffs and Global Trade

Trump’s promises to impose a 25% tariff on all imports from Mexico and Canada, as well as a 10% tariff on Chinese goods, set for January, have caused unrest in Asian economies dependent on trade with the U.S. Indonesia’s stock index fell 5% in November, its worst performance since 2020. South Korea posted a 3,9% drop, marking its fifth straight month of losses and the longest streak in more than three years.

These tariffs must also impact export-focused European economies such as Germany are adding pressure to an already fragile European market. Meanwhile, U.S. investors are increasingly turning to domestic industries, especially technology companies benefiting from the AI ​​revolution. Nvidia, the chip leader, is a favorite for future gains.

Christopher Rossbach, chief investment officer at J.Stern & Co, highlighted the resilience of the U.S. economy, stating: “Employment is strong, inflation is easing, and interest rates are starting to fall.” The bullish market sentiment reflects growing confidence that Wall Street will outperform its global peers in the coming months.

The European economy faces growing challenges. The euro fell more than 3% against the dollar in November, trading at $1,058. The European Central Bank (ECB) is expected to cut rates in December, with a target of a 25 basis point cut to 3%. However, cautious comments from ECB Governing Council member Isabel Schnabel have dampened expectations for a deeper 50 basis point cut, creating uncertainty in the market.

German government bond yields have fallen for four straight weeks. The 10-year yield fell 27 basis points in November to 2,113%, widening the gap with French yields. France’s borrowing costs are now close to Greece’s, with its 10-year yield at 2,96%.

As Europe struggles, U.S. Treasury yields have also fallen, hitting 4,24%, down 17 basis points this week. Trump’s appointment of hedge fund manager Scott Bessent as Treasury Secretary has helped calm fears about fiscal uncertainty. Markets are still pricing in a 25 basis point rate cut by the Federal Reserve next month, which would bring the funds rate down from its current range of 4,5%-4,75%. However, Fed officials remain cautious about the inflation risks associated with Trump’s tariffs.

The yen showed strength, posting its best week in four months at 150,15 per dollar. Robust inflation data in Tokyo fueled speculation the Bank of Japan could finally raise interest rates. Meanwhile, the dollar has fallen against major currencies, losing 1,5% this week, but analysts expect currency volatility to continue as markets assess Trump’s policies and the actions of global central banks.

Commodities are also in flux. Brent crude is trading at $72,13 a barrel, down 0,4% on the day and more than 3% this week. A ceasefire deal between Israel and Hezbollah has eased fears of supply disruptions, sending prices lower. Gold followed a similar trend, falling 0,5% to $2.655 an ounce as risk appetite returned to global markets.

The European outlook remains clouded by political and economic challenges. France’s government struggles to implement tax hikes and budget cuts amid threats from Le Pen to dismantle Macron’s coalition. Investors brace for more volatility as the ECB prepares its next move. In the U.S., Wall Street looks set to extend its lead, with strong economic data and AI-driven optimism keeping traders bullish.