| The lack of an enthusiastic relief rally in stock markets given Donald Trump’s turnaround on tariffs shows investors are feeling bruised by the events of the past 48 hours. While trade belligerence does indeed look like a negotiating strategy, markets didn’t anticipate these shock-and-awe tactics so soon. It’s also a reminder that, especially just a week after the DeepSeek drama, investors are edgy about the potential for a correction. US equity valuations remain high and the S&P 500 is only 2% below its record close on Jan. 23. “The markets are not priced for escalating trade war risk, and if Trump’s ultimate strategy is to ‘escalate to de-escalate,’ investors should expect more volatility and pullbacks in the near term,” writes Jason Draho, head of asset allocation Americas at UBS Global Wealth Management. In Canada, strategists may need to lower their 2025 targets, says Philip Petursson at IG Wealth Management. They see the S&P/TSX Composite rising to 28,517 points this year, according to data compiled by Bloomberg, which would represent a 13% gain. There’s a similar dynamic in currency markets. Yes, the Mexican peso and Canada’s dollar rebounded after Trump spoke to the leaders of those two countries and agreed to delay tariffs. But the threat of more surprise action will keep them under pressure. “Our biggest take-away from weekend developments is that irrespective of what happens in coming days, the market will be required to hold a structurally higher risk premium on a trade war across all asset classes,’’ Deutsche Bank’s George Saravelos wrote. —Phil Serafino | 
