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Who can predict what he will do next? FT columnist Tim Harford began his column dated April 16 with this sentence and went on to explore the possibility of the markets losing against US President Donald Trump’s modus operandi. Two weeks since then, the crippling uncertainty surrounding tariffs remain and Mr Market cannot decide whether the reaction to Trump’s moves was logical or just the generational trauma of 1929 redux.

Many market gurus have said markets are illogical and irrational, prone to mania and frenzies rather than the cold logic ascribed to them. But what if the thing markets react to is itself irrational or volatile? As Harford puts it, “The problem with interpreting market reaction is that it remains unclear what exactly it should be reacting to.”

This week has seen plenty of things to react on for markets. Trump’s tariff flipflops aside, there have been corporate quarterly earnings report cards coming in. Logically, stock prices should reflect the company’s performance and potential, and to that extent earnings performance should take centre stage. But corporate honchos are laying it out to investors of how bad the tariff situation can be for American firms and its economy. As this FT piece, free to read for Moneycontrol Pro subscribers, pointed out, company chiefs have used earnings calls to express their dismay on tariffs and show worry over recession.

Meanwhile, the International Monetary Fund (IMF) has cut global economic growth and that of the US sharply down for 2025 and 2026, due to the tariff effect. Supply chains, shipping firms and containers are feeling the pressure and beginning to unravel.

The upshot is that it is not looking good for US markets. The central theme so far has been that dollar assets are not a safe haven anymore. Our Chart of the Day shows that the bond market has realised this. The spread between Asian bonds and US treasury yield is below their 10-year averages which indicates, as analysts at Nomura point out, there is a structural shift. If capital is not flying back to the US, is it staying in emerging markets?

Beyond the necessary index requirements, foreign investors are not picking India’s bonds and the exit from equities continues. That said, markets seem to find the necessary wind to stay afloat sporadically -- although today they seem to be engulfed with new fears. While tariffs could take the air out of the trade balloon, strong pockets of resilience can be seen in some segments. Ananya Roy examines how the banking, financial services, and insurance (BFSI) sector is bucking the broad weakness in the market in her column here.

For India’s financiers, the Reserve Bank of India’s (RBI) move to ease monetary policy through both interest rates and liquidity is a blessing. As long as lenders can tide over the margin pressure in the short term as lending rates adjust lower, they can reap rewards on the liabilities side. Of course, there are risks as a falling interest rate cycle invariably pushes lenders to seek riskier credit for that extra yield. But as Roy explains, “…given that financial services had stayed on the sidelines while the broad market index had rallied in recent years, BFSI is now available at much more palatable valuations.” So far, the results of some of the big lenders indicate resilient balance sheet growth and in-line margin pressure, an indication that investors won’t regret betting on banks.

Elsewhere though, the story is different. Corporate results have begun trickling in and it isn’t a great start. IT bellwethers haven’t impressed investors, and fast moving consumer goods showed slowdown and cost pressures. As the rest of the sectors’ performance pours out, would it show a similar discomforting weakness or the resilience the Indian economy boasts of? Either way, the spectre of tariffs and the complicated impact due to myriad trade relations across borders would continue to play on investors’ minds.

Note that tariffs have long lasting effects while Mr Market obsesses about short term outcomes. As this piece by Harford today in FT puts it, “There are many problems that look like they are caused by trade, but are actually caused by something else.” Perhaps Mr Market is cognizant of those actual causes and that scares it more than tariffs.

Investing insights from our research team

Axis Bank Q4 FY25 – steady quarter, enabling environment to lift FY26 outlook

Tech Mahindra sticks to FY27 goals despite macro challenges

Why this company is the crown jewel in the Indian IT pack

Weekly Tactical Pick: This FMCG major is a play on rural demand recovery

Margins to take a back seat as HUL gears up for volume growth

Nestle India: Navigating demand challenges and commodity inflation

SAMHI Hotels: Will the GIC deal be a game-changer for the stock?

Syngene: Growth trajectory to moderate in FY26

What else are we reading?

Why Modi’s water war could hurt Pakistan more than military action

Startup scandals like Gensol need real consequences

Opening up banking to minors is a good idea, but fraught with risk

The AI Gold Rush: Where should Indian startups stake their claim?

Apple aims to source all US iPhones from India in pivot away from China (republished from the FT)

India’s neighbour from hell

National Security: Time to unite against terror and strengthen border security

Suspension of Indus Treaty shouldn’t shock Pakistan; it was warned

Indus Treaty suspension is a wakeup call for Bangladesh

The Innovation Deficit: Moving from quick fixes to quantum leaps

Markets

Co-location-based HFTs, global trading firms lead to 4x jump in share of algo trading in last decade

Tech and Startups

Top 5 IT companies post single-digit growth for second consecutive fiscal amid macro headwinds Technical Picks: RELIANCE, MFSL, MPHASIS, ATUL.

Aparna IyerMoneycontrol Pro

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