The imposition of tariffs by President Trump on imports from Mexico and Canada has injected uncertainty into the financial markets, affecting both equities and bonds. These tariffs are anticipated to reduce GDP by 1.2% and increase inflation by 0.7%, according to Bloomberg Economics. This dual threat of inflationary pressures and recession risks is unsettling investors, as it could lead to higher short-term interest rates while simultaneously increasing demand for long-dated Treasury bonds. The equity market, already sensitive to downside risks, is under additional pressure as the anticipated slowdown in GDP growth could negatively impact corporate earnings.
The ProShares UltraPro S&P 500 (UPRO) ETF experienced a decline, dropping 2.31% to $92.39 at 1:00 PM on Monday, February 3.