Market Bottom in Sight, But Trade War Fears with China Resurface

Nikolay Stoykov, Managing Partner at Alaric Securities on “Business Start”, BloombergTV Bulgaria

It’s difficult to pinpoint the bottom of the U.S. markets. This is a highly emotional moment — and for good reason. I’m not trying to call the bottom, but I suspect we are close to it. What gives me a sense of relative calm is the absence of problems in the credit or banking sectors. The major difference from 2008 is that, back then, there was no trust among financial institutions. And when that happens, there really is no bottom.

As for the tariffs imposed by President Trump on China, in my view, we’ve already hit the ceiling. Technically, they could still be raised, but that would be a misstep. In my opinion, the right approach is to accept this as a probable peak and begin rolling them back. That’s what Nikolay Stoykov, Managing Partner at Alaric Securities, said on Bloomberg TV Bulgaria’s “Business Start”, hosted by Hristo Nikolov.

Recession Fears vs. Financial System Strength

“There is some risk of a recession — that much is clear. But the key issue isn’t whether we see a technical recession. The question is: will the markets plunge dramatically if one does occur? My view is that, as long as the banking system remains sound, even a technical recession won’t lead to a major collapse in financial markets. Sooner or later, a recession will come — that’s inevitable — but I try to look past the emotional intensity of the current moment.”

U.S.–Europe Relations: A Fractured but Enduring Alliance

The relationship between Europe and the United States is not only historical, but rooted in shared values. When a husband and wife argue, it may look dramatic from the outside. Observers might think divorce is imminent, but in reality, that rarely happens.

“I view the current drama over international trade tariffs as a bad family quarrel — but the door hasn’t been slammed shut. Trump has said he’s open to talks. What he wants, though, is a significant, or at least noticeable, change in behavior. I believe that change is likely. Markets are reacting with fear because people have become complacent — assuming markets will always go up, just as we tend to assume that partnerships will always be smooth. But occasionally, it seems, a confrontation is needed. We’re in such a moment right now.”

Partnerships should be 50/50, but in reality, they rarely are. When one side exhibits undesirable behavior, the other may take corrective — even restrictive — actions. But the goal isn’t to end the relationship; it’s to change the dynamic for the better, Stoykov explained.

NATO and Defense Spending: Europe Still Falling Short

“The idea is to negotiate in a way that leads to behavioral change. The truth about transatlantic relations is that, after the war in Ukraine and the annexation of Crimea by Russia, European countries should have made a greater effort to strengthen their own defense. But we haven’t really seen that. Yes, in 2024, we’re seeing some movement, and military spending is approaching 2% of GDP, but many countries are still below that threshold.”

We’ve reached a point where the U.S. is expected to defend us — particularly around the Suez Canal and against the Houthis — but this is something Europeans should be able to handle themselves. Unfortunately, they can’t, Stoykov added.

“The reason is fairly obvious. We’re debating how many genders there are on Earth — and it might come to the point where the Russians show up and tell us the answer themselves.”

So why did American indices fall more sharply than European and Asian ones, even though the tariffs were supposed to benefit the U.S. economy? Where is the bottom of the S&P? Is the American economy heading into trouble, and is a recession on the horizon? Are tech stocks now trading at attractive levels? What can we learn from Warren Buffett, and should we be closely watching his moves? Where is the U.S. dollar headed? Have Trump’s tariffs reached their limit, or can we expect more increases? What are the broader expectations for the dollar?

Watch the full commentary in the video.

Source: BloombergTV Bulgaria