Investors are moving quickly into traditional safe-haven assets after US president Donald Trump announced sweeping tariffs reciprocal last week, intensifying concerns of a global recession.
Analysts say that the Japanese yen is a popular refuge, as are the Swiss franc and government bonds.
Since early April, the Japanese yen has gained around 3 percent against the US dollar.
Experts say that this is only the beginning.
Ebrahim Rahbari is the head of rates strategy for Absolute Strategy Research. He argues that the yen will benefit from lower US interest rates as well as Japan’s relatively low exposure to global trade pressures.
Rahbari, a CNBC analyst, said that the Japanese yen would be a good candidate — and probably the best — to hide from trade tensions or a US recession.
“It’s cheap, the likely fall in US interest rates is going to narrow the rate differentials down to the yen. And even though Japan is an exporter, it’s overall reliance on the trade is lower, especially as fiscal policy is loose,” he said.
The Swiss franc is also gaining in popularity amid yen uncertainty
The Swiss franc also strengthened by over 3%, reaching a new six-month high.
Market participants see this as a reliable shield against the turmoil caused by Trump’s trade actions.
Matt Orton, head, advisory solutions, at Raymond James Investment Management pointed out that, while both the yen (yen) and the franc (franc) offer safe harbor, the Swiss currency may be the better option.
He said that given the uncertainty surrounding the Bank of Japan rate hike trajectory, franc could act as a better hedge.
Analysts continue to debate the next steps of the Bank of Japan.
While the yen typically thrives during global slowdowns, Japan’s own economic vulnerabilities–particularly Trump’s targeted tariffs on cars and parts–may limit its upside.
Jeff Ng, SumitomoMitsui Banking Corporation’s head of Asia macro-strategy, said: “Even though the world avoids an abrupt hard landing, the Japanese yen could do well, as the BOJ may hike against a wave global easing.”
He warned that a slowing economy in Japan could force the BOJ into keeping rates low and tempering yen increases.
Bonds and exotic alternatives are gaining popularity
Some investors are looking for alternatives to the safest investments.
Rahbari emphasized the Brazilian real as being a potential beneficiary.
“It’s cheap, has a high carry and is relatively immune to global trade dynamics,” explained he, adding that real was among the top performers of the year.
Investors also pour money into cash and low risk fixed income instruments, such as US Treasurys or Japanese government bonds.
Both yields have fallen, reflecting the surge in demand.
The benchmark US 10-year Treasury rate has fallen 6% since April, and the Japanese 10-year bond yield has plunged to its lowest point since December 2024.
Jose Torres is a senior economist at Interactive Brokers and he has observed that the markets are dominated by a risk-off position.
Investors are shifting their investments from equities to Treasurys, gold and crude oil. They also use a variety of derivatives as a hedge against further market declines.
Gold shines amid market anxiety
Gold remains the safest haven. Gold prices reached a record-high following Trump’s announcement. Although they have since retreated, they remain high.
Analysts expect to see more gains if geopolitical uncertainties and trade uncertainty persist.
Analysts at BMI said that “gold remains boosted by escalating global trade uncertainty, increased geopolitical tensions and a weaker US Dollar, as well as increasing central bank purchases and rising recession risks.”
Adrian Ash, director at BullionVault’s research department, agreed. “Weaker trade and higher input costs, as well as shrinking margins, are hurting the stock markets,” he said.
“Such a gloomy economic outlook offers the perfect backdrop to further gains in gold.”
Equities have also taken a hit. US markets closed with a loss over 9% last week, according to FactSet. This marked the end of a brutal stretch in risk assets.
JPMorgan has increased its probability of an US and global economic recession by the end of the year to 60%, up from 40% previously, reflecting a worsening mood on Wall Street.
Orton summarized the current market sentiment with a single sentence: “There’s currently no bid for stocks.”
This post Looking for safe havens in the face of Trump tariff market chaos? Analysts’ predictions may change as the market unfolds
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