Another month, and another change in trade policy from Donald Trump – from this Wednesday (4 June), imports of steel and aluminium are to face 50% tariffs, double the previous levy, after China allegedly violated some deal or other.

Yet markets have barely flinched, with the S&P 500, the Nasdaq Composite and indeed European indices trading just a few percentage points off their all-time highs.

Also, after a huge spike on ‘Liberation Day’, the VIX index of implied 30-day stock market volatility is back to normal levels.

Ditto the ‘Fear-and-greed’ indicator, put together by CNN to show what is driving stock markets at any given point.

This lack of concern is explained by the ‘TACO trade’ (Trump Always Chickens Out), a phrase which has gone viral since it was coined by the Financial Times a month ago.

Not just online, either – traders are increasingly betting the more outlandish the policies the White House announces the less likely they are to be implemented, so if stocks sell off sharply, as they did in April, it’s the cue to keep buying.

Bond markets on the other hand are still nervous, not so much about an ever-shifting trade policy but about Trump’s ‘Big, Beautiful Bill’ which threatens to increase total US debt and interest payments to record levels.

Investment firms which were traditionally big buyers of long-dated US Treasury bonds are now sitting on the sidelines, wary of the budget gap and the growing debt burden.

In an interview with Bloomberg, DoubleLine Capital fund manager Bill Campbell said the firm had two approaches to 30-year Treasuries, either ‘a buyers’ strike’ or outright short-selling.

With an auction of 30-year bonds scheduled for this Thursday (5 June), it will be interesting to see whether the Treasury scales back issuance in the face of lower demand.

Jamie Dimon, chief executive of JPMorgan Chase (JPM:NYSE), the world’s largest bank, has been unusually vocal, warning US regulators there will be ‘a crack in the bond market’ which will cause panic and potentially require central bank intervention.

We aren’t in the forecasting game, but there are enough sensible people waving warning flags for us to take notice.

Dividend payers are a good fall-back, and in this week’s cover feature we look at a trio of stocks with the potential to keep raising their payouts along with a list of dependable investment trust and fund ‘dividend heroes’.

Also in this week’s magazine, we look at two smaller companies which have recently lost major contracts and seen their shares sold off heavily.

Winning contracts is down to firms themselves, whereas losing them is usually the result of factors beyond their control such as customers cutting back their capital spending.

Given the uncertain economic outlook, we are likely to see more companies warning of contract delays and cancellations, so keep an eye on small-cap holdings especially.

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