Fading Tariff Fears Provide Breathing Space

For the month as a whole, the U.S. S&P 500 rose 2.03 percent measured in USD, the European Stoxx 600 ended up 0.96 percent measured in EUR, the Nordic VINX rose 1.91 percent measured in NOK. At home, the Oslo Stock Exchange rose 1.31 percent (OSEBX).

Fading Tariff Fears Provide Breathing Space

After a spring marked by turmoil, the summer has helped ease fears of an escalating trade war. Agreements between the U.S., the EU, and Japan helped calm the markets, while tariff increases against China were postponed until November. Although India was hit hard with a doubling of tariff rates, the country is considered less central to the U.S. trade balance. A U.S. court ruling that struck down some of the new retaliatory tariffs provided additional relief, even though the process is still ongoing. Overall, investors perceive the risk of broad escalation as lower than earlier this year. Markets increasingly view tariffs as a persistent cost rather than an acute threat, which has boosted risk appetite throughout August.

Adjusted Growth Paths, but Uncertainty Remains

Although optimism has increased, uncertainty about the long-term growth and inflation outlook remains high. In practice, tariffs function as a tax, and experience shows that the burden often falls on importers and consumers. This can lead to lower margins for businesses or higher prices for households. Growth expectations in the U.S. have indeed been revised somewhat upward recently, but remain below the levels seen before this spring’s tariff announcements. Inflation expectations have declined but remain higher than previously estimated. The jury is therefore still out on how heavy the overall burden will be. For investors, this means the backdrop is characterized by both signs of improvement and persistent uncertainty.

Unemployment on the Rise?

After several years of a tight labor market, the U.S. is now showing signs of cooling. Downward revisions of previous employment figures created uncertainty in August, and growth in the number of new jobs has slowed. At the same time, stricter immigration policies have helped keep unemployment low, at 4.2 percent. This can be interpreted as a normalization following the aftermath of the pandemic rather than a dramatic shift. Nevertheless, developments in the labor market remain central to future growth, particularly if lower demand were to amplify pressure on employment. The balance between resilience and vulnerability makes the labor market an important thermometer going forward.

The Road Ahead

August confirmed that risk appetite remains strong, with new record levels in both global and Norwegian equity markets. Markets are supported by prospects of U.S. interest rate cuts, combined with fading fears of a broad trade conflict. At the same time, several risk factors still need close monitoring: the effect of higher tariffs, uncertainty about the strength of the labor market, and the trajectory of inflation. Emerging economies show signs of improvement but are also more vulnerable to changes in global trade policy. Overall, the picture is characterized by a mix of optimism and caution. Markets enter the autumn with solid momentum, but without any guarantee of a smooth journey ahead