Research @ Citi Markets Edition: Volatility is Back
Oct 14, 2025
Markets are bracing for volatility as U.S.–China trade tensions escalate. Recent tariff news sent shockwaves through equity markets, raising concerns about future negotiations. With earnings season approaching, high expectations meet stretched valuations, heightening the potential for market swings. Experts discuss the implications of a worst-case scenario involving 100% tariffs, which could severely impact trade relations. Amid these challenges, analysts maintain a cautious yet constructive outlook on equity performance.
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Stretched Sentiment Breeds Volatility
- Markets can flip to higher volatility when bullish sentiment, high growth expectations, and stretched valuations collide.
- Such conditions set up a choppier period even without obvious new macro shocks.
Trade Spike Triggered A 3% Drop
- A late-week trade escalation sent US equities down almost 3% in a day after rare-earth export controls and a suggested 100% tariff.
- That sudden move illustrated how quickly sentiment can reverse amid trade headlines.
Room For Diplomacy Despite Rhetoric
- Many measures announced by the US and China have delayed implementation dates, leaving room for negotiation ahead of APEC.
- Investors should watch rhetoric over coming weeks since policies aren't immediately effective.