Will the forecast increase market volatility in the short term?

Short‑term volatility outlook:

The renewed tariff forecast – now underscored by a Goldman‑Sachs economist – injects fresh policy‑risk into the market. Tariff‑related cost‑pass‑through to consumers raises near‑term inflation expectations and squeezes disposable‑income, which in turn can trigger rapid repricing across consumer‑discretionary equities, commodities (especially metals and agricultural inputs) and the U.S. dollar‑linked bond market. Historically, similar “tariff‑shock” headlines have coincided with spikes in the CBOE Volatility Index (VIX) and widened intraday price ranges. Expect the VIX to test the 20‑25 % band in the next 3‑5 days, with the implied‑volatility curve steepening on the upside.

Actionable trading angles:

- Equities: Trim exposure to high‑beta consumer‑discretionary and retail names (e.g., “Consumer Staples” ETFs) on the short side; consider defensive, low‑beta sectors (utilities, health‑care) for upside.

- Fixed income: Anticipate a short‑term rally in short‑duration Treasuries and inflation‑linked TIPS as investors hedge against a potential CPI uptick.

- FX/Commodities: A weaker USD may support gold and other safe‑haven assets; meanwhile, commodity‑linked currencies (CAD, NZD) could face pressure if tariff‑related supply‑chain bottlenecks materialize.

- Options/Volatility: Buying near‑term VIX calls or buying protective puts on high‑beta consumer stocks can capture the expected volatility surge while limiting downside.

In sum, the tariff forecast is likely to heighten short‑term market volatility. Positioning for a volatility‑biased environment—by reducing exposure to tariff‑sensitive equities, holding defensive assets, and using volatility‑oriented instruments—offers the most prudent risk‑managed approach.