Rieder flagged the potential for a stronger dollar as a potential setback for liquidity and calm in emerging markets, because it's the world's reserve currency and the primary way debt is funded. The dollar's rise this year, following its worst since 2003, is already weighing on emerging-market assets, according to Erin Browne, the head of asset allocation at UBS Asset Management. "What's interesting about that is if you look at the correlation of EM equities relative to the US dollar, it's very highly correlated, which is telling you that the move that we see in EM assets right now is largely being driven by the dollar," Browne said at a media roundtable on Friday. EM equities fell 17.7% from their peak in early February to late-June, worse than the 14% drop during the taper tantrum of 2013, Browne said.
Markets have canaries in coal mine and risk more volatility, Rieder says - Business Insider
In fact, after almost every major negative tariff-related news in the recent past, the market has fallen, but then reversed itself, and sometimes sharply. In each case, “buying the news” made sense. That is the lesson the stock market is learning from Donald Trump. The market is being trained to buy the initial negative reaction to tariff-related news. Although Donald Trump himself may be very unpredictable, the stock market considers the tariff battle to be a provider of rather predictable opportunity instead.
Trump has trained stock market investors - MarketWatch
President Donald Trump likes to tweet about stocks, approval ratings, and unfair trade practices, among other things. Economists at Bank of America Merrill Lynch believe Trump will continue to target China on trade until US stocks or his presidential approval rating begins to take a hit. They think China will respond to any additional tariffs from the US by staging a war of economic attrition.
Bank of America: Trump stocks tweets predict future of China trade war - Business Insider