Global markets have been shaken by US President Donald Trump’s blitz of tariffs on allies and adversaries alike, wiping trillions of dollars from the value of global stocks.

Below, private bank investment leaders answer four key questions on what the Trump tariffs mean for client portfolios and beyond.

What is Trump trying to achieve?

Private banks and other market commentators believe that the Trump administration is trying to fundamentally reset the US’s global trading relationships to reduce its budget deficits, balance its trade and current accounts.

Michael Strobaek, global chief investment officer at Lombard Odier, explains that Trump is pursuing “shock therapy” for the world’s biggest economy, suggesting that new trade barriers are unlikely to be peeled back entirely anytime soon. “How long, exactly, these new tariffs stay in place is difficult but it is a key factor for the economic outlook,” he continued. “Tariff levels will also be crucial. Much depends on trading partners’ reactions, as well as US trade deficit dynamics.”

Kelly Bogdanova, a portfolio analyst at RBC Wealth Management, sees some “wiggle-room” on the tariff levels themselves. She points to comments from National Economic Council director Kevin Hassett suggesting that more than 50 countries have already reached out to negotiate tariff levels. “We’d be surprised if Trump didn’t adjust his tariff policies in the coming weeks or months including by at least telegraphing some progress on tentative trade deals, especially if political pressure builds and inflation and overall economic data continue to deteriorate,” she said.

However, Mark Tinker, CIO and managing director at independent asset manager Toscafund Asset Management, believes the tariffs are part of a broader “system change” by the Trump administration that aims to encourage more onshoring and ultimately force US-based multinationals to pay more tax. “Team Trump are viewing the US economy as a corporation that needs restructuring and in particular they are trying to fix the twin deficits on trade and government spending,” he said.

How much further will markets fall?

Trillions of dollars in stock market value has gone up in smoke in recent trading sessions as investors have been forced to rapidly re-price assets in light of likely diminished earnings. Unfortunately, private banks believe that things are unlikely to get better in the short-term.

UBS Global Wealth Management’s Chief Investment Office believes that effective tariff rates will start to fall by 3Q2025 amid business, legal and political pressure, as individual trade deals are struck country-by-country. In this scenario, the S&P 500 could recover to about 5,800 points by year end, or about 15% higher than its level at Monday’s close.

RBC WM is slightly less optimistic, forecasting that the S&P 500 will close out 2025 at about 5,500 points. “We think earnings uncertainty will linger for months due to tariff and related supply chain risks,” said the bank’s Bogdanova. The Canadian lender (tariff level: 25%) characterises the current level of volatility as a “growth scare”, meaning that markets are beginning to price in recession fears.

For Lombard Odier’s Strobaek, global and US stocks have not yet entered a fully-fledged bear market. “We see potential upside from current levels, but expect sustained volatility over the coming weeks and months, until these major shifts feed into corporate data. There are likely to be further rebounds and sell-offs throughout the rest of the first half of 2025, and a measured approach is key for long-term investors.”

Are we headed for a recession?

Investors are rushing to ascertain how the global tariffs blitz impacts the US economic picture, given the implications for inflation and the likelihood of retaliatory measures from US trading partners.

Lombard Odier, for example, is forecasting a 50% chance of a US recession, but it is anticipating a slowdown rather than a contraction in GDP data this year. The lender predicts that the world’s biggest economy will grow by 1.2% in 2025. “This is a materially slower expansion than we had predicted at the end of 2024 under a different, and more transactional scenario for tariffs,” said Strobaek. “But it is still far from a recession.”

According to Vincenzo Vedda, global CIO of DWS, if none of the announced tariffs are reversed via deals in the coming four weeks, the global economy will be hit by an “oil price shock”-like crisis by the middle of 2025. In that scenario, only the most defensive types of equities – such as telecoms, utilities, consumer staples and healthcare – are likely to outperform. At the same time, cyclical sectors like software, consumer discretionary companies, and capital goods will likely undergo the biggest earnings estimate cuts.

“We are still hopeful that the coming days and weeks will provide enough time to avoid a full-blown trade war,” Vedda believes. “More cars could be made in the US [and] US farmers could be allowed to export more products abroad.”

Where are the opportunities?

While markets are likely to remain volatile for the short-term, private banks are still plucking out trade ideas for clients seeking to hedge the chaos.

RBC WM, for example, believes that utilities stocks will outperform in the current environment, given their relatively high dividends and likely insulation from tariffs due to their domestic focus. “This defensive sector tends to hold up better when economic risks rise and revenue and profits of the underlying utilities companies tend to be rather predictable even when economic conditions are challenging,” said Bogdanova.

Meanwhile, UBS GWM remains sanguine on the long-term thesis of trends like artificial intelligence (AI), longevity, and power resources, despite near-term headwinds. “We believe that the longer term drivers remain firmly intact and that structured strategies including capital preservation strategies should be considered as ways of building longer term exposure while managing near-term risks,” said the bank’s chief investment office.

Lombard Odier sees opportunities in the Swiss franc and Japanese yen, with the Swiss pure-play (tariff level: 32%) predicting that both currencies will appreciate versus the dollar, past its previous 12-month forecasts of 0.85 and 144 per greenback, respectively.