Investors Brace for Volatile Weeks as Global Risk Events Loom

Global investors are preparing for a period of heightened market volatility triggered by a series of unpredictable political and economic developments. From key U.S. jobs data to looming trade and fiscal deadlines, market players are expecting sharp swings across asset classes. Insight Investment’s April La Russe highlighted an unusual combination of high risk and minimal compensation for holding risky assets, setting the stage for possible market turbulence in the coming weeks.

A critical inflection point arrives on July 9, when the U.S. and European Union face a decision on tariff implementation. While some investors anticipate a soft outcome such as universal 10% tariffs or a postponement, others warn that a failure to reach an agreement could reignite fears of a trade war. Corporate credit markets are already showing signs of strain due to the uncertainty, and asset managers like Russell Investments and Amundi caution that markets may have already priced in a best-case scenario, limiting further upside.

The upcoming tariff developments are likely to impact the U.S. dollar and trigger cross-currency volatility, particularly as the greenback has already dropped 10% against major currencies this year. Treasuries could suffer if global trade tensions intensify, while gold, which has risen over 25% year-to-date, might experience profit-taking if the tariff outlook improves. Despite their usual inverse relationship, both gold and stocks have rallied amid easing recession fears.

Beyond trade concerns, investors are closely watching U.S. labor market data, especially the upcoming August 1 payrolls report, which is expected to have a bigger market impact than even tariff news. Analysts like Van Luu from Russell Investments argue that U.S. economic indicators have not received enough attention and could surprise markets. Additionally, currencies like the Japanese yen might experience sharp movements depending on how rate cut expectations evolve in response to jobs data.

Europe also faces pivotal moments that could affect investor confidence. France’s budget vote on July 14 is under close scrutiny as Prime Minister Francois Bayrou navigates political instability and attempts to reduce the euro zone’s largest deficit. German Bund yields are rising amid expectations of increased borrowing, while concerns over the French-German yield gap are re-emerging. Meanwhile, the UK faces renewed fiscal pressure due to controversial policy shifts, adding another layer of uncertainty to European bond markets.

Source: Reuters