The great economic policy uncertainty makes it almost impossible to say anything clever about the future. The past month is clear evidence. In April, Donald Trump first proclaimed "Liberation Day" with a salvo of tariff increases. Then he lowered them for most trading partners – but raised them for China, which hit back. Subsequently, bilateral negotiations have been conducted with some individual countries, penalties have been imposed on certain minerals, while others (e.g electronics and auto parts) have been reduced. Now the US is threatening punitive tariffs on foreign films as well!

The result is a total hodgepodge. The hard part is not just guessing what decisions will actually come out of this mess when the dust settles (if it settles at all). It is equally difficult to assess the economic effects. Different companies, sectors and countries will gain and lose different amounts, at different times. This will have strongly varying effects.

However, one thing is clear. At the macro level, trade wars lead to both higher inflation and lower production. Economists have begun to fear stagflation – both stagnation and inflation at the same time – especially in the United States, which is likely to be the biggest loser from its president's actions.

This puts the Federal Reserve in a precarious situation. Raise the interest rate against inflation or lower it against stagnation? The president has his opinion clear: The interest rate should be lowered. The threat of political intervention – sometimes on, sometimes off – against the central bank naturally increases the uncertainty even more.

In this situation, the credibility of the United States is damaged. An outflow of currency takes place, the dollar falls – and this at the same time as the market interest rate differential against the Euro has risen. A highly unusual combination, which shows that investors are re-evaluating their faith in the dollar and the US economy.

Initially, the outflow from the US led to stronger stock markets in Europe, as investors largely rotated from American investments into European, not least Swedish. But after a while, the general unrest also hit European stock markets. In recent weeks, however, the stock markets have generally bounced back. The reasons are that Mr Trump has toned down his threats against the Fed, while some market analysts seem to believe the worst is over as regards tariffs.

We are less sanguine. Firstly, with such a mercurial president in the White House, you never know what will come next. Secondly, even if some tariffs do come down from “Liberation Day” Everest peaks, they will still land at levels far, far above where they were. The hits against supply chains and costs will be severe, and we doubt that they are priced in.

One reason markets underestimate the real costs may simply be that they have not materialised in hard data yet. But within a couple of months, they will be clearly visible, as Chinese exports to the US freeze and shelves at Walmart will be empty. Prices will rise. Political strife in congress is bound to sharpen, and the President’s polls will fall. We don’t know if Mr Trump then will back or double down. One thing is clear, though, the Republicans are willing to push for large tax cuts, which will hurt the budget and once again push the yields on treasuries into the limelight.

Fixed income markets in Europe are in a nervous waiting position, in doubt about whether there will be inflation or stagnation – or both. The ECB will cut more, but long bond yields will move up rather than down.

The same applies to Sweden. At the beginning of the year, inflation came in too high and the markets priced in hikes from the Riksbank. However, the latest figures indicate weaker economic development in Sweden as well. For now, the Riksbank is content to sit still, but eventually they may decide to move down the key rate a notch. The recent strengthening of the SEK will help, as it has disinflationary effects.

Our basic view is therefore that stock markets remain nervous, short-term interest rates may fall slightly, but long-term interest rates will rise due to long-term concerns about inflation and increasing debt.