Quick overview
International investment bank Barclays has urged caution for the months of August and September, citing a seasonal uptick in market volatility tied to increased monetary policy uncertainty in the U.S., as well as political friction stirred by President Donald Trump’s ongoing criticism of the Federal Reserve and unresolved trade disputes.
In a report titled “Summer Anxiety,” Barclays analysts noted that markets tend to experience turbulence during the late summer period. “Political uncertainty is keeping markets on edge,” the report stated, adding that “hedging appears prudent,” particularly with equity markets hovering near all-time highs amid what it described as a “noisy” macroeconomic backdrop.
Tariff Threats Remain a Key Risk
A primary concern is the lack of progress in U.S. trade negotiations. While a deal with Indonesia was recently reported, Barclays warned that “uncertainty lingers for the European Union” ahead of the August 1 deadline.
Although market reactions have been relatively muted so far, the bank cautioned that this “likely reflects a degree of investor complacency,” with a 30% tariff on EU goods still looming as a credible risk.
“A full implementation of 30% tariffs on the EU would almost certainly trigger a deeper economic slowdown and severely undermine the prevailing TACO (‘Trump Always Chickens Out’) trade,” the analysts wrote, referring to a strategy used by some investors who assume Trump’s threats won’t be enforced.
Additional Market Pressures
Beyond trade tensions, markets are also being pressured by a recent rise in U.S. Treasury yields, driven by stronger-than-expected retail inflation.
Barclays also cited “growing concerns about the expanding fiscal deficit and the Fed’s positioning under Jerome Powell” as factors contributing to investor unease. While President Trump has denied reports that he plans to fire Powell, initial headlines around the possibility caused market jitters earlier in the week.
Mixed Outlook for the Rest of 2025
Despite the near-term caution, Barclays maintained a constructive longer-term view: “Growth and earnings fundamentals continue to support equity markets,” the bank said, highlighting that U.S. economic surprises have turned positive and Q2 earnings have shown “corporate resilience.”
Regionally, Barclays expressed confidence in European equities: “We continue to see a path for European stocks to break out to new highs by year-end,” though the firm warned the road to recovery “may not be a smooth one.”
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
