The Big Whale: How do we assess the current situation?
Alexandre Baradez: We can make several very clear observations. Firstly, we are in a situation of extreme volatility on the US and European markets. The VIX, which measures volatility, has risen to 60, a level not seen since the Covid-19 pandemic. This is unprecedented for over 20 years, if we exclude the health crisis and the subprime crisis. This means we're in the middle of a crash, even if it's a little counter-intuitive because the word 'crash' often conjures up images of a sudden, unexpected fall. Here, it's different: this crash is partly 'self-inflicted', directly caused by the US President's trade policy decisions. There was no external shock; it was political decisions that created the panic.
On the stock market, a fall of 15 to 20% in a few days is already considered a crash, whatever the cause. And here, the market is pricing in not just a recession, but a very rapid contraction in growth. We have gone from growth of 2.4% in the last half of the year in the United States to a scenario where we fear a recession in the first half of the following year, perhaps even a 2% contraction in GDP. This kind of rapid swing in an economic cycle is only possible if there is a massive shock to confidence, and that is exactly what is happening: consumer and business confidence has been falling sharply for several months and is now accelerating.
Is this recession inevitable or can it still be avoided?
It is not totally inevitable, but it has become very likely. What is currently fuelling fears of recession are the leading indicators, which are barometers of confidence. In the past, manufacturing PMIs have sometimes been in contraction territory for months without causing a real recession, notably between 2022 and 2024, when industry showed signs of weakness but US growth held steady at around 2-3%. But this time it's different because it's services that are stalling, and the US economy is 80% based on services.
The latest ISM Services shows a contraction in new orders, which is a worrying early signal. And at the same time, the "prices paid" component of this ISM is rising again, which could revive the risk of stagflation: activity slowing but with prices remaining high. Major banks such as Goldman Sachs are also seeing their earnings fall sharply, which shows that the slowdown is already perceptible. So even if technically the recession isn't here yet, the contraction in activity seems almost certain at this stage.
On the trade war, who is in a position of strength today?
For the moment, the United States retains a position of relative strength, essentially because it represents the world's leading consumer market. When you have purchasing power that sucks in a large proportion of European, Chinese or Asian exports, you have enormous leverage. If the US slows down its consumption, it's not just shooting itself in the foot: it's also affecting all the major exporting economies.
However, its position remains fragile because it's based on very high domestic confidence and healthy financial markets. However, the US markets have already lost 20% in the space of a few months, and if the correction continues by a further 10 or 15%, the domestic pressure will become untenable for Trump, particularly via his own political and economic supporters. What's more, the recent rise in US interest rates due to fears of massive bond sales is a worrying sign. The markets could become the real safeguard against an uncontrolled escalation.
"China still holds more than $700 billion in US Treasuries" After suffering 104% US taxes, China hit back on Wednesday with 84% taxes. Is their riposte really significant?
The Chinese riposte remains fairly measured for the time being. China has announced tariffs on American products, but their direct impact remains limited because China has become much less dependent on American imports. They have developed their own technological, automotive and industrial ecosystem, which reduces their vulnerability. On the other hand, the affluent Chinese population continues to consume American products, particularly iPhones and luxury goods. Their taxation will therefore affect certain targeted products, but without causing a major economic shock in the short term.
What is much more dangerous for the United States is the financial weapon: China still holds more than $700 billion in US Treasury bonds. A massive sale would cause interest rates to rise sharply and undermine US financial stability. Even if this is not yet their stated strategy, recent movements in rates show that some players may already be starting to send signals in this direction.
Could China really use the weapon of Treasury bonds?
If Beijing decided to sell these assets en masse, this would cause the value of US bonds to plummet and interest rates to rise mechanically, making it much more expensive to finance the US government. This would be an extremely hard blow for Washington, especially given the current budgetary situation. But it would also be a double-edged sword, because a devaluation of Treasury bonds would directly affect China's financial reserves.
That's why the Chinese are cautious: they wave the threat around without acting brutally. What's more, it's not just China that could exert this pressure: Japan, which now holds even more US debt, could also weigh in. If we have seen such strong pressure on US rates in recent days, with a rise of 70 basis points in 2-3 days, this may already be a signal that some are beginning to test the solidity of the US bond market. This kind of movement, in the most liquid market in the world, is never insignificant.
Are US financial circles still aligned with Trump?
We can clearly feel cracks appearing. Bill Ackman, an influential Wall Street figure who had supported Trump, is beginning to express serious reservations. He acknowledges that, in principle, lobbying for a reduction in global taxes can be justified. But he criticises the method used: too blunt, too fast, too risky. The current sequence, with falling markets, rising rates and liquidity risks, was not at all the right time to unleash an all-out trade war.
Many financiers understand that if Trump does not change strategy quickly, he could plummet US growth, jeopardise his own mandate and precipitate a financial crisis. And even if they don't yet dare say it outright, more and more of Trump's economic backers are starting to worry behind the scenes.
Big US tech companies, like Apple, seem to be keeping very quiet. They are not totally passive, but they are acting behind the scenes. Many of them have very powerful lobbying contacts in Washington and are sending out messages of concern, but never attacking Trump head-on to avoid reprisals. It's important to understand that American tech is going through a very difficult period: Tesla is down 50%, Apple has fallen 30%, and on average, the Magnificent Seven have lost 35% of their capitalisation in the space of a few months. This is huge, especially as these companies have millions of individual shareholders who are suffering these losses via their pension funds and retirement plans.
Silicon Valley is remaining on the defensive because it knows that Trump can quickly use regulatory leverage to make their lives harder. But not hearing from them publicly doesn't mean they aren't trying, internally, to influence current policy.
Click here to book your seat "Today, the objective is to isolate China" In relation to China, Europe is adopting a different strategy in this context. Is it too timid?
I would say that Europe is playing a much more skilful card than China. It is trying to avoid a head-on escalation. Brussels is proposing compromises: zero reciprocal taxes on cars and industry, and the partial opening up of markets. At the same time, Europe points out that it too has retaliatory weapons, such as the anti-coercion instrument that could be aimed directly at the American digital giants. But it is not using them immediately.
This is intelligent diplomacy because it takes account of the fragility of its economic fabric and the sensitivity of its public opinion. In this way, Europe is showing that it wants to avoid confrontation, while preparing to defend itself firmly if necessary. This is much more refined and undoubtedly more effective in the long term than immediately embarking on a logic of escalation.
Are China and the United States now alone face to face in this war?
Yes, today it really is a head-on confrontation between the United States and China. The US administration is open about it: there is a desire to draw a clear dividing line. On the one hand, 70 countries are prepared to negotiate trade agreements with the United States. On the other, China is clearly designated as the systemic rival. This is a major strategic break.
Before, even under Trump in his first term, there were still attempts to include China in a reshaped world order. Today, the aim is to isolate China, contain it and weaken it economically. This is an extremely dangerous dynamic, because it forces many countries to choose sides, which they do not necessarily want to do. And for the markets, it adds another layer of uncertainty.
Trump seems determined. Can the markets really force him to change his strategy?
In the United States, the market is almost a fourth estate. When the markets plunge sharply, there are immediate repercussions for household confidence, economic activity and banking stability. We saw this in 2018: the first trade war between the United States and China led to an explosion in interbank rates, a sign that banks no longer trusted each other to lend to each other.
If a similar liquidity stress were to occur today, the Fed would be forced to intervene and Trump would absolutely have to change course to avoid an economic collapse. The market is therefore a real safeguard against a suicidal trade policy. If there is another 10-15% fall in the equity markets and tensions on the interbank market, Trump will be forced to negotiate.
Are we starting to see signs of liquidity problems?
Not yet in a systemic way, but we are getting dangerously close. For the time being, we are seeing a classic risk-off sequence: equities fall, oil falls, and flows out of risky assets. What is more worrying is that long-term US interest rates are now rising sharply, whereas they should have fallen in the face of stock market panic. This shows that there is massive selling of bonds, probably linked to players wanting to offload US assets.
The real ultimate warning sign will be the deterioration in interbank liquidity, i.e. the moment when banks will no longer trust each other to lend to each other, as in 2018. And that can happen very quickly: in just a few days, sometimes even a few hours, interest rates explode and the financial machine can grind to a halt. That's when the Fed would have to intervene urgently. For the moment, we're not there yet, but the bond tensions show that the system is under pressure.
"This is typical of a rise in panic on the markets" What do the movements in gold and oil tell us in this context?
What is striking is that we initially had a classic pattern: with the start of trade tensions, gold broke through $3,000, a sign of its safe-haven status. Oil fell, reflecting expectations of a global economic slowdown. But what is more subtle is that gold, after soaring, went through a phase of decline.
This is often explained by margin calls: when funds lose money on other assets, they have to sell even their safe haven positions like gold to cover their losses. So this is not a sign that risk has disappeared; on the contrary, it is a sign of liquidity stress. The current sequence shows that we are in a phase where everything is falling at the same time, equities, commodities, bonds... This is typical of a rise in panic on the markets.
How is Bitcoin behaving in this context?
Bitcoin is interesting to observe because it has behaved like a technology asset in recent months, highly correlated with the Nasdaq. Since the US pre-election, Bitcoin and the Nasdaq have moved almost in parallel, which shows that investors still see it as a risky asset. But what has been notable in recent days is that Bitcoin is showing a degree of resilience: it is falling less than the Nasdaq. This is not insignificant.
It could indicate that in this widespread stress, some investors are beginning to see Bitcoin not just as a technology asset, but also as an alternative reserve. For me, the area between $70,000 and $80,000 is very interesting for long-term investors. It is an area of rich technical support, and historically, these accumulation levels often precede phases of stabilisation and then recovery. For a patient profile, these are levels to work on seriously.
Great financial figures, such as Larry Fink, have defended Bitcoin recently, is this an important signal?
Yes, it's very important and very structuring for the future of Bitcoin. Seeing figures like BlackRock's Larry Fink recognise the value of Bitcoin and the tokenisation of assets shows that traditional finance is finally taking these new instruments on board. It's not just fashion: it's a structural change. They see that Bitcoin's historical volatility is decreasing, which is an essential condition for an asset to be widely accepted.
Historically, Bitcoin had volatility peaks of 300%; today, we're much lower. Above all, the massive influx of institutional investors is creating market depth: more players, more liquidity, less risk of extreme crashes. This completely changes Bitcoin's risk profile and paves the way for even wider adoption. Personally, I'm a great believer in the rise of tokenised assets in the coming years, and Bitcoin will remain at the heart of this movement.
Do US techs also offer opportunities after the recent correction?
Yes, but with caution. The big tech companies have suffered enormously in recent months: Tesla has lost 50%, Nvidia a third and Apple almost 30%. This is starting to create attractive entry points for long-term investors. Of course, we have to accept the possibility of a further 10-20% correction, especially if volatility persists. But overall, when you pay for a company like Nvidia or Apple after a 30-50% correction, historically, over 3 to 5 year horizons, you perform very well.
And this reasoning also applies to other indices: even on the CAC 40 around 7,000 points, these are levels that it is reasonable to work on buying for a long-term investor. You just have to be selective, aim for solid stocks, and accept that volatility will remain high in the short term.
"European industry is clearly one of the big winners in the current sequence" Can we expect a geographical rotation of investments, with more interest in Europe and Asia?
Yes, and I think it's even already underway. The trade and geopolitical context is automatically pushing investors to diversify their portfolios, and therefore to reduce their historical overweighting of the United States. In the first half of this year, we have already seen European and emerging markets outperform US equities, which is quite rare. Trump's aggressive policy is isolating the United States and prompting investors to look for alternatives in Europe, Asia and Latin America.
This is a fundamental movement: global portfolios were disproportionately concentrated in the United States, so it was only logical that a rotation would occur at some point. And today, this rotation is driven as much by economic reasons as by political ones.
Which European sectors could benefit from this new situation?
European industry is clearly one of the big winners in the current sequence. Everything to do with infrastructure, defence and reindustrialisation is benefiting from a very strong structural dynamic. The Stock 600 Industrie Europe, for example, is an excellent vehicle for capturing this underlying trend. Even the European automotive sector could be in for a positive surprise: if China, under pressure from US trade, refocuses on its domestic demand, this will ease competition on European markets.
Other sectors to consider are telecoms, which are often neglected but are regaining their appeal with the challenges of digital sovereignty. And for bolder profiles, listed property offers opportunities after massive falls since 2021. These are sectors that will automatically benefit from lower interest rates and the expected normalisation of the economy after the current period of stress. On the other hand, I would be more cautious about commodities, particularly oil, which remain vulnerable to the risk of a global economic slowdown.
With all these prospects, is Bitcoin relevant in a portfolio?
Yes, Bitcoin is an excellent portfolio complement in the current configuration. We are likely to enter a phase of falling interest rates, pressure on the dollar and lasting geopolitical instability: three factors that have historically supported Bitcoin. Bitcoin should no longer be seen solely as an ultra-volatile speculative asset. With the massive influx of institutional investors, Bitcoin has become 'thicker': it reacts better to good news, and its volatility has become more manageable.
From here, what would be your price targets for Bitcoin?
My first reasonable target would be a return to around $110,000, over a timeframe of one to one and a half years. That would be a logical level given current technical levels and the potential for a recovery if trade tensions ease. Then, over longer time horizons, $150,000 to $200,000 seems achievable within three years. But we need to understand that the momentum will not be as explosive as after Covid: it will probably be a slower, more structured rally, with broad phases of consolidation. Which is healthy, in fact, because it shows that Bitcoin is becoming a more mature asset, gradually integrated into traditional portfolios.
Should we also anticipate a return to ultra-accommodative monetary policies (QE)?
This is not the basic scenario at the moment, but we shouldn't rule it out if the situation gets out of hand. If the trade war escalates to the point of causing major stress on bank liquidity or sovereign debt, then yes, the Fed could be forced to relaunch a programme of asset purchases, a QE. Initially, however, we are more likely to see a pause in the Fed's balance sheet reduction and gradual rate cuts.
This would already be a very favourable environment for risky assets. QE would come back into play only in the event of a serious systemic crisis, such as an uncontrolled surge in long rates or a major interbank liquidity crisis.
"If risk appetite picks up, Bitcoin could rebound" Would the ECB diverge from the Fed in this context?
This is already the case and the divergence could increase. The Fed has slowed its rate cuts after the last one in December, while the ECB continues to ease its monetary policy. Europe now offers better monetary visibility than the United States, which is quite unprecedented.
This is helping to boost the relative attractiveness of European assets in global portfolios. This divergence, if confirmed, could even lead to a lasting rebalancing of investment flows in favour of Europe, especially as European markets remain cheaper overall than US markets.
Are we at risk of reliving a sovereign debt crisis in Europe?
You should never say never, but today the risk remains moderate. Germany's massive budget plan, backed by European funds, will irrigate the entire European economy and relieve the more fragile states such as France, Italy and Spain. On the other hand, if the trade war drags on and plunges the European economy into recession, spreads could widen considerably, particularly between France and Germany. The real risk would be a prolonged escalation over several months, which would stifle growth and worsen perceptions of sovereign risk. But for the time being, the central scenario remains one of European resilience.
Finally, can we be a little optimistic for Europe in this context?
Yes, and this is not naïve optimism: there are real objective reasons. Europe is moving. We feel that the Commission is beginning to understand that we need to lighten the regulatory burden, that we need to invest massively in industry and defence, and that we need to make the internal market more attractive to businesses.
Europe has a real card to play: today it offers more stability than the United States, it benefits from massive structural investment plans, and it has significant potential to catch up on the financial markets. Flows are already starting to reposition themselves. If this momentum continues, Europe could become a credible investment alternative to the US and China in the next few years.
And in terms of European equities, which sectors would be the most promising in this 'new world'?
Industry in the broadest sense is a must: infrastructure, equipment manufacturers, defence, construction, everything that will benefit from European re-industrialisation. The automotive sector could also benefit, especially if China stimulates its domestic consumption. The long-forgotten telecoms sector is also back in the spotlight, with the challenges of digital sovereignty. Listed property, which has been very depressed since 2021, also offers interesting opportunities in the medium term with falling rates.
On the other hand, I would be more cautious about energy and industrial commodities, which are more exposed to a slowdown in global growth. Overall, we should favour sectors linked to productive investment, economic sovereignty, and capable of benefiting from the gradual fall in interest rates.
What about Bitcoin in all this? With all these prospects of falling interest rates and liquidity injections, isn't it a good idea to have it as a hedge against the worst-case scenario?
In this context of likely falling interest rates and pressure on the dollar, Bitcoin has its place in a hedging strategy. It is an asset that has historically benefited from phases of monetary expansion and falling long-term interest rates, as this reduces the attractiveness of traditional investments such as bonds. And there's another important factor: the current correlation between Bitcoin and the Nasdaq is still high, but it is diminishing. Bitcoin is now showing greater resilience during stress phases.
If risk appetite picks up again, Bitcoin could bounce back strongly, and it would retain a "hedge" role against systemic risks should things get out of hand. Its capitalisation remains relatively small compared with the major traditional asset classes, so even a modest influx of new capital could trigger major price movements. In short, not to have it in a portfolio at all today would be to miss out on protection and opportunity.
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