The Asian Development Bank projects a growth decrease in Asia due to U.S. tariffs, forecasting a reduction by one percentage point for 2026.
Amid economic uncertainties, investors are advised to consider higher quality bonds as a viable option against market turbulence and volatility.
Deep dives
Impact of Trade Tariffs on Economic Growth
The Asian Development Bank has revised its growth forecast for the Asia-Pacific region, projecting a decrease due to anticipated U.S. tariffs, which they estimate will lower growth by one percentage point from 4.9% in 2025 to 4.7% in 2026. The ongoing trade conflict and geopolitical tensions present significant challenges; however, there is also a focus on seizing opportunities through private sector development and capital mobilization. The president of the Asian Development Bank emphasized the importance of increasing private sector lending significantly, aiming for a fourfold increase to $13 billion annually. It is crucial for countries in the region to boost domestic demand, pursue sound economic policies, and diversify their trade partnerships to remain resilient against external shocks.
Market Response to Economic Data
A notable concern among market participants is how recent economic data might reflect the impacts of ongoing trade tensions, particularly with corporate earnings and other indicators on the horizon. Analysts noted that although equity markets have stabilized, the S&P has declined about 10% from its peak, leading to discussions on the potential escalation of trade conflicts and its effects on various economic sectors. Observations from recent activities indicated that much of the goods currently in the U.S. originated from vessels that left China before tariffs were implemented, suggesting that the full effects of the tariffs have yet to be felt. This uncertainty continues to influence investor sentiment, as traders navigate potential changes in the economic outlook and policy responses from the U.S. administration.
Opportunities in Fixed Income amid Economic Uncertainty
Amidst concerns over inflation and economic growth, the bond market is being viewed as an attractive investment option, particularly in the context of higher quality U.S. fixed income. Analysts commented that agency mortgages and investment-grade corporate bonds appear to offer compelling opportunities as yields remain favorable based on current volatility levels. The Federal Reserve's shift towards a growth-supporting stance over an inflation-reducing one has further affected market dynamics, with expectations of potential interest rate cuts later in the year. Consequently, there is a recommendation for investors to focus on higher quality bonds which may provide better protection and returns against market turbulence.
The Asian Development Bank has lowered its growth forecast for Asia further after the region found itself the hardest hit by tariffs from the US. The multilateral institution said those tariffs will shave growth in the region by a third of a percentage point in 2025 and a full percentage point in 2026. In its annual outlook report released Wednesday - numbers for which were calculated before the April 2 tariff announcements by President Donald Trump - ADB forecast growth in emerging Asia to moderate to 4.9% in 2025 and 4.7% in 2026. ADB President Masato Kanda speaks exclusively with Bloomberg's Shery Ahn in Tokyo.
Plus - a late-day wave of dip buying in the US erased losses in stocks, with Wall Street investors awaiting a slew of corporate earnings and economic data for insights on the impacts of President Donald Trump's tariff war. As the S&P 500 closed higher for five consecutive sessions, the American equity benchmark posted its longest winning streak since November. Monday marked the fifth time in the past month the index fully wiped out an intraday gain or drop of 1% or more. The number of reversals already matches the total seen in the entire year of 2024. We take a look at the US economy with Clayton Triick, Head of Portfolio Management at Angel Oak Capital Advisors.
