Global Economic Outlook - The US is behaving like a developing nation, exhibiting core market correlations more common in developing countries, such as currency weakening despite rising yields and the breakdown of negative correlations between bonds and equities [4] - The market initially had an 80% probability of a "Reagan moment" but fluctuated to below 50% by early April, and is now around 70%, indicating uncertainty about whether the US will experience a positive transformation or stagflation and recession [6] - There's a 50/50 chance of either "globalization light" or total fragmentation, with the outcome depending on how other countries react [6] Market and Corporate Reactions - The market views US corporations as strong with good balance sheets and innovations, and believes the US is escalating trade tensions to de-escalate, expecting either deadline extensions or favorable outcomes from negotiations by August 1st [8][9] - CEOs are generally in a "wait and see" mode, postponing major investment plans due to uncertainty about tariffs (e g, whether they will be 30% or 10%, volatile or fixed), impacting supply chains and market strategies [11][12] - Financial markets have adapted to the idea that deadlines will be pushed back, but the ultimate destination of trade policies remains unknown [14][15] Trade and Geopolitical Risks - Mexico was surprised by the potential 30% tariff, indicating that countries not currently in focus could quickly become targets [20] - China is not out of the woods regarding tariff issues and is no longer a locomotive of global growth, with concerns that it may start dumping exports, especially on the European Union, causing trade tensions [21][22] - The EU is preparing a response to US tariff threats and may seek alliances with other countries [23] Investment Strategies - European financial markets have outperformed US markets in the first quarter by 17 percentage points, benefiting from an excessive overweighting of US assets at the start of the year [26] - For Europe to continue outperforming, it needs to attract capital back, which it hasn't been doing sufficiently [27] - Companies are considering "C plus many" or "many" strategies for supply chains, reducing reliance on China and increasing resilience, which involves rewiring supply chains and is time-consuming and expensive [18]