‘Watch Out For US Tariff Impact, Fed Policy’: Geoffrey Dennis Predicts Pullback In Global Equity Markets

The recent dollar rebound, coupled with tariff uncertainty and unclear US Fed policy, may trigger a short-term dip in global equities. However, a major correction is unlikely unless global tariffs escalate sharply or recession signals emerge in the United States or globally, independent emerging markets commentator Geoffrey Dennis said on July 11.

“I think we’re entering a period where it will be difficult to sustain further upward movement in equity markets for a while. We need to absorb the impact of the tariff news and wait to see what the Federal Reserve decides to do. So, I’m expecting a bit of a pullback in global markets,” he told NDTV Profit in an interview.

“The only way you will get a big correction here is if we have massive tariffs around the world that are indeed announced and imposed and also if we end up with a situation where, for example, the US and the global economies look like they're going into recession,” he added. 

Dennis’ remarks followed amid the unexpected announcement by US President Donald Trump on Thursday, imposing a 35% tariff on imports from Canada starting next month.

Decoding the impact of the development, he said, “It looked like we had some sort of agreement with Canada, and Canada is one of the United States’ closest trading partners. This is not how you treat a close trading partner, so this is a big surprise. It is a negative development, although it's worth pointing out that the so-called "taco trade" (Trump always chickens out) is still in play. Canadian tariffs won't come in until Aug. 1, and we don’t know if he’ll change his mind by then.”

According to Dennis, the reason why markets are relatively calm (compared to April) despite Trump’s fresh announcement could be due to a combination of two factors.

“He (Trump) backed away from all of those earlier announcements, at least temporarily. So, there's a precedent, and he may well do it again. But at some point, I think he’ll have to implement at least some of these tariffs; otherwise, he risks being seen as someone who’s simply crying wolf. The second point is that there now seems to be a broader perception that the inflation risk from these tariffs is lower than originally feared,” he said.

The equity markets expert also suggested there's a growing belief that any price increases resulting from the tariffs might be short-lived rather than triggering a lasting rise in inflation. 

“I don’t model inflation myself, but recent inflation numbers have held up well in the short term. So the thinking may be that any price increases would be more of a one-off adjustment rather than a sustained, significant rise in inflation. If that’s the case, it helps explain why markets are reacting more calmly,” he noted.

Meanwhile, the benchmark Nifty 50 index was trading at 25,157.25, down 198 points, or 0.78%, at 11:26 a.m., while the BSE Sensex stood 677.73 points, or 0.81%, lower at 82,512.55.