Markets After Liberation Day
Six markets, one shock, twelve months — the divergence map, the alignment audit, and the domestic political read.
On April 2, 2025, every major equity market repriced simultaneously. Twelve months later the outcomes are radically different: a 24% S&P 500 gain against a near-flat Nifty 50, the same shock producing six distinct trajectories shaped by energy exposure, trade deal speed, and the compounding Iran war.
| Index | Base | Trough | Draw | 52-wk High | Apr 17 | Return | Read |
|---|---|---|---|---|---|---|---|
| S&P 500 | 5,670 | 4,982 (Apr 9) | −12.1% | ~7,100 (Feb) | ~7,027 | +23.9% | Full recovery; crossed 7,000 Apr 15 |
| FTSE 100 | 8,646 | ~7,691 (Apr 9) | −11.1% | 10,934 (Feb) | ~10,560 | +22.2% | Crossed 10,000 for first time Jan 2026 |
| SSE Composite | ~3,350 | ~3,010 (Apr 9) | −10.1% | ~4,100 (Mar) | 4,055 | +21.0% | Stimulus-driven; PPI turned positive Mar 2026 |
| Euro Stoxx 50 | ~5,150 | ~4,450 (Apr 9) | −13.6% | ~5,980 (Feb) | ~5,933 | +15.2% | Stagflation risk capping recovery |
| Hang Seng | ~23,100 | ~19,800 (Apr 9) | −14.3% | ~23,800 (Oct) | ~26,394 | +14.3% | Range-bound; May summit the binary event |
| Nifty 50 | ~23,500 | ~21,750 (Apr 7) | −7.4% | 26,373 (Sep) | ~24,250 | +3.2% | Double-shocked; Hormuz recovery trade live |
| Phase | Period | Driver | Winners | Losers |
|---|---|---|---|---|
| I — Shock (Apr 2–9, 2025) | ||||
| Tariff shock & trough | Apr 2–9 | VIX 52.3; S&P −12% in 48hrs; universal repricing | None — all fell | Hang Seng −14.3%; Euro Stoxx −13.6% |
| II — Recovery & Rotation (Apr 9 – Oct 30, 2025) | ||||
| Trade deals + stimulus | Apr–Oct 2025 | 90-day pause; UK deal May; EU/JP/KR Jul; China stimulus; “Sell America” rotation | FTSE; SSE; S&P | Nifty (pre-war losing streak); HSI (range) |
| III — Volatility Cluster (Oct 2025 – Feb 2026) | ||||
| Shutdown + Epstein + Busan | Oct–Jan | 43-day US shutdown; Epstein files; Busan truce extension; FTSE crosses 10,000 | FTSE; S&P record Dec 24 | Nifty stalling below highs |
| IV — Iran War & Ceasefire (Feb 28 – Apr 17, 2026) | ||||
| Hormuz shock & relief | Feb–Apr | Brent $70→$121; Hormuz blockade; ceasefire; S&P crosses 7,000 | S&P; FTSE; SSE (oil discount) | Nifty (hardest hit; biggest weekly gain on ceasefire) |
The Liberation Day shock was the sharpest two-day drawdown since the pandemic — VIX spiked to 52.3, the index fell 12.1% to 4,982. The 90-day tariff pause, AI enterprise broadening, and strong Q2–Q3 earnings drove a textbook V-recovery. By early May the index had surpassed its pre-Liberation Day level. Full-year 2025: +16.4%; record close 6,932 on Christmas Eve.
The Iran war (Feb 28, 2026) delivered a second ~10% drawdown before ceasefire relief erased it entirely. The index crossed 7,000 for the first time on April 15. Goldman CEO Solomon’s recession warning if Hormuz stays shut is the tail risk the relief rally is currently discounting.
The FTSE 100’s +22% is analytically the most interesting result. Its historic absence of technology stocks — a 2023–24 disadvantage — became an advantage when Liberation Day triggered a “sell America” rotation. UK financials, miners, and defence names offered value, yield, and no AI multiple to compress. Gold miners surged (Fresnillo +364%); defence rerated (Babcock +147%, Rolls-Royce +95%).
The UK secured the first post-Liberation Day trade deal in May 2025 (10% tariff), removing policy overhang early. FTSE crossed 9,000 for the first time in July 2025, then 10,000 for the first time in history on January 2, 2026 — its seventh-best annual return ever, ahead of the S&P 500 for the full year.
China’s +21% is a quiet outperformance built on domestic stimulus providing an earnings floor, the tariff truce providing policy clarity, and the Iran war providing a perverse energy windfall via discounted Iranian crude. The SSE barely flinched in the early Iran conflict months. Key April 2026 signal: China’s PPI turned positive (+0.5% YoY, March) for the first time since October 2022 — ending three years of deflationary earnings pressure. The May 14–15 Trump–Xi summit is the next catalyst.
Europe’s +15% is respectable but understates the structural disadvantage. The EU secured its deal in July 2025 (15% tariff) and defence spending surged. But the Iran war’s Hormuz closure hit European industrial costs with structural force — energy import dependence is higher here than in the US or UK. The EU Economy Commissioner flagged a “stagflationary shock” that could cut 0.4–0.6% off EU GDP. The stagflation framing limits ECB optionality: if energy-driven inflation persists, the ECB cannot cut rates without credibility cost.
The Hang Seng’s +14% is a range-trading result. Sharp relief rallies on US–China de-escalation signals alternated with geopolitical volatility. Southbound Stock Connect flows provided the structural floor. The index is technically neutral — range 25,300–27,300. The May 14–15 Trump–Xi summit in Beijing is the single most important catalyst. A durable trade architecture extension — particularly if tariffs move below the current 10% baseline — would break the range decisively higher.
India entered Liberation Day already weakened by five consecutive months of losses — the worst streak since 1996. Liberation Day added a further −7.4%. Recovery followed: the Nifty reached an all-time high of ~26,373 in October 2025. Then the Iran war’s Hormuz closure hit India’s current account with structural precision: India imports ~85% of crude requirements, and Brent surging from $70 to $121 in six weeks was the most concentrated crude shock to India’s macro since 2022. The Nifty fell from ~26,000 to ~22,100 — roughly −15% from the October high.
The recovery trade is now live. This week’s +2% is the first expression of the Hormuz-reopening thesis. The India–US interim deal (Feb 2026, 18% tariff from 50%) removes a second structural overhang. Oil sensitivity is symmetric — it hurt most on the way up and recovers fastest on the way down. The June–September monsoon onset is six weeks away; the ENSO/IOD interaction makes any India call conditional through Q3 2026.
Alignment is broader than tariff rates. It encompasses verbal support and dissent, strategic coordination, military posture, energy purchasing choices, institutional stance, and the significance of silences.
- Trade deal speed: First mover globally. Secured 10% — the lowest rate in the universe — with no retaliation at any point.
- Verbal posture: No public disagreement with US trade policy framing. Accepted “reciprocal” language without contest.
- Defence/NATO: Committed to raise spending to 2.5% of GDP, explicitly framed as meeting US burden-sharing demands — an active political alignment signal.
- Iran war: Diplomatically supported US–Israel position. No independent dissent on escalation pace. No contradictory ceasefire call.
- Ukraine: Continued strong military and financial support — not a point of tension with Washington.
- Epstein files: No comment. Treated as a US domestic matter. Silence as non-interference.
- Market implication: FTSE outperformance is partly a political positioning premium — the market rewarded early, unambiguous alignment.
- Trade deals: Both secured 15% tariff in exchange for large US investment pledges — Japan $550bn. Auto and timber preferential rates secured.
- Security treaties: US bilateral security partners. Trump’s burden-sharing demands partly met through the investment frameworks.
- China posture: Japan’s Indo-Pacific strategy and South Korea’s semiconductor alignment with US tech controls reinforce structural alignment beyond trade.
- Iran war: Both expressed concern about energy disruption. Supported diplomatic resolution but provided no direct military contribution — quiet acceptance of US-led position.
- Currency tension: Caution about rapid yen/won appreciation remains an unresolved structural tension with US “fair currency” demands.
- Market implication: Nikkei’s strong 2025 recovery was partly driven by deal certainty. TSMC/Samsung semiconductor supply chain alignment is a structural multi-year positive.
- Trade deal: Framework at 15% with $600bn US investment pledge.
- Public qualification: The EU itself characterised the investment pledge as “not legally binding” — the most explicit public dissent of any “aligned” economy on deal terms.
- Defence: European rearmament accelerating sharply. NATO spending targets met more broadly than any point in the alliance’s history.
- Iran war stance: EU issued an independent ceasefire call. Pope Leo XIV criticised the war; Trump attacked the pontiff publicly — no parallel in the UK or Japan alignments.
- Hungary normalisation: Orbán’s ouster removes the EU’s most disruptive internal veto risk. New Tisza government expected to be more aligned on Ukraine and Russia.
- China overcapacity: EU–China tensions over EVs, solar, semiconductors rising independently of US position — partial divergence from the unified front the US expects.
- Market implication: EU underperformance vs UK and US reflects the caveats — they are real. Stagflation constraint narrows ECB room that the BoE and Fed do not face.
- Russian oil — the central friction: India’s continued purchase of discounted Russian crude through all of 2025 was the primary political friction. A 25% punitive tariff stacked on top of the 26% reciprocal rate produced a total 50% — the highest rate imposed on any major Asia-Pacific economy.
- Non-retaliation but non-compliance: India did not retaliate publicly, but did not change energy behaviour for many months. Strategic patience — resistance without escalation — is India’s signature diplomatic style.
- Iran war silence: India called for de-escalation but made no public alignment with US military posture. Classic strategic ambiguity.
- February 2026 pivot: Modi–Trump call leads to the interim deal: tariff reduced to 18%, India commits to curb Russian oil and buy US energy. The clearest alignment language India has used with any US administration.
- Implementation fragility: IEEPA Supreme Court ruling (Feb 2026) created ambiguity. Full BTA not signed as of April 2026.
- Defence alignment: India–US defence cooperation deepening through QUAD, semiconductor transfers, joint exercises — a positive long-run signal operating independently of trade tensions.
- Market implication: Nifty’s laggard performance is the direct consequence of delayed, partial alignment. Recovery is conditional on Hormuz staying open, monsoon being normal, and full BTA completion.
- Not aligned — transactional: China and the US are in managed competitive coexistence. The truce serves both sides’ short-term economic interests; structural competition continues unabated.
- Initial retaliation: China was the only major economy to match US tariffs tit-for-tat at 125% before the Geneva truce. The escalation-de-escalation cycle defines the relationship.
- Iran and Russian oil purchases: China continued buying both throughout 2025–26, at discounted prices. Direct economic benefit; direct signal that China’s energy alignment opposes US sanctions architecture on both fronts.
- Technology controls: BIS entity list, semiconductor export restrictions, rare earth licensing remain active beneath the trade truce surface. No rollback.
- Summit engagement: Both sides have strong incentive to maintain the truce. The May 14–15 Beijing summit is a chance for a multi-year framework — not a strategic reset.
- Verbal register: Xi strategically warm in bilateral communications; unchanged positions on structural issues. “Win-win” rhetoric with no structural concessions from either side.
- Market implication: Hang Seng range-trading correctly prices truce renewal probability, not strategic alignment — because strategic alignment is not on offer.
- No alignment, no deal: Tariffs irrelevant; bilateral trade negligible. The relationship is defined by Ukraine sanctions, NATO posture, and Iran.
- Iran war windfall — the paradox: The Hormuz closure delivered an accidental revenue windfall. Russian Urals surged from $40/bbl in February to $121 on March 20, briefly at a premium to Brent. Daily oil revenue approximately doubled to ~$270mn. Russia benefited most financially from a war it did not start.
- Orbán’s ouster — strategic loss: Hungary’s new Tisza government removes Russia’s most reliable EU internal interlocutor. Orbán had blocked Ukraine aid packages and maintained direct ties with Putin.
- No Ukraine resolution: Despite early second-term Trump signals, no deal has materialised. Relations remain adversarial on Ukraine, NATO, and energy sanctions.
- Market implication: Sustained Hormuz opening and crude normalisation cut Russian revenues significantly. A return to conflict extends the windfall. Russia’s financial interest in sustained Hormuz disruption is, paradoxically, rational.
A US president at 41% approval with economy approval at a career-low 31%, heading into November midterms with the House on a knife edge and the Iran war unresolved, has constrained room to escalate further or make durable trade commitments. The polls are directly relevant to how long the ceasefire holds and whether the May China summit can deliver a binding framework.
Approval: 47%
Ballot: R+2
- Started 47% — highest opening of either term; 2pts above 2017 (45%). Strong Republican base enthusiasm (91%) and independent goodwill (+46%)
- DOGE announced; ICE raids begin Jan 20. Immigration approval 48% — net positive issue for Trump at this point
Approval: 44%→42%
Ballot: R+1→D+2
- DOGE fired 260,000 federal workers by March. Dismantled USAID, slashed NIH and Education Dept. Public reaction increasingly negative outside the base
- Liberation Day (Apr 2) and market selloff widen disapproval. Quinnipiac: 41% — lowest of second term at that point. Economy approval falls from 49% to 43%
- Generic ballot: first sustained Democratic lead in April. YouGov/Economist: Dems lead by 2pts — first time since 2022
Approval: 44%→40%
Ballot: D+2→D+3
- OBBB passes 218–214. 55–64% of Americans opposed. Cuts Medicaid $880bn; extends tax cuts disproportionately benefiting higher earners
- ICE raids intensify. Immigration approval flips from net +4 in March to −8 in June as imagery spreads nationally
- Approval among 2024 voters drops to 85% from 95% at inauguration. Non-voter approval falls from 45% to 36%
Approval: 40%→36%
Ballot: D+4→D+10 peak
- 43-day shutdown (Oct 1–Nov 12) — longest in US history. Congressional approval crashes to 15%. AP-NORC: 62% disapproval. Economy approval falls to 33%
- Epstein files: Nov 12 emails surface linking Trump to Epstein network. Nov 19 — Act signed. Dec 19 — DOJ releases documents, heavily redacted, drawing bipartisan criticism. Jan 30, 2026 release mentions Trump flying on Epstein’s plane in the 1990s
- Morning Consult: Trump loses 6 approval points following Epstein releases. Marist/NPR (Nov): Democrats 55%, Republicans 41% — first double-digit lead since 2022
Approval: 36%→45%
Ballot: D+6
- Shutdown ends Nov 12. S&P record high Dec 24 (6,932) provides positive backdrop. DDHQ: +5.2pt swing in Trump’s favour mid-December
- RCP: 43.9% / 53.4% entering January 2026. Silver Bulletin net: −8.2
Approval: 44%→35%
Ballot: D+5→D+6.2
- Iran war (Feb 28) triggers fastest approval decline of either term. YouGov: 39% late-Feb → 35% mid-March. Reuters/Ipsos: 36%. Fox News disapproval: 59% — career high
- Gas prices cross $4/gallon. CNN Apr 1: economy approval career-low 31%; inflation approval 27% — both all-time lows for either term
- Independents collapse: approval falls from 46% (January) to 22% (late March) — most dramatic single-period independent decline of either term. Silver Bulletin net: −17.5 (second-term low)
Approval: ~41%
Ballot: D+6.2
- RCP: 41.4% approval / 56.6% disapproval. Silver Bulletin net: −16.6 — essentially unchanged from ceasefire announcement. Economy damage is sticky: 2/3 of Americans say Trump’s policies worsened conditions — up 10pts since January; highest reading of either term
- Midterm trajectory: D+6.2 historically projects ~25–30 seat gains — enough for a House majority if sustained. Republicans’ gerrymandering advantage makes the actual outcome closer to a toss-up. Democrats need +4 Senate seats — harder path, with 22 of 35 up seats held by Republicans
- Strong disapproval (46% Rasmussen) is the politically critical number — intensity drives midterm turnout, running heavily against the president 6.5 months before November 3
The Liberation Day chart is a 12-month stress test of which equity markets had the structural composition to absorb two sequential shocks. The 21-point divergence between S&P 500 (+24%) and Nifty 50 (+3%) maps directly onto energy import exposure and trade deal speed — both structural variables, not noise.
The alignment audit adds the dimension the pure performance data cannot show: the difference between alignment and compliance. The UK is aligned. China is compliant. India was reluctant-compliant then partially pivoted. Europe is aligned with caveats its own officials publicly stated. Russia is adversarial but accidentally enriched by the conflict it didn’t start.
The approval data frames the political constraint. A president at 41% with midterms in six months has every incentive to close deals before November. The May Trump–Xi summit’s structural content is the test that will determine how much of this relief trade is permanent. Navigate by what you know. Adjust when the picture changes.
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