Exogenous shocks can affect equity markets by changing volatility and cross-market co-movement. This study examines how two U.S.-centred events, treated as different shock types, influence time-varying conditional correlations between the U.S. stock market and other G7 markets. The uncertainty shock is proxied by the U.S. presidential election of 5 November 2024, while the action shock is proxied by President Trump’s 2 April 2025 announcement of reciprocal tariffs. Using daily log returns for the S&P 500 and leading indices for Canada, France, Germany, Italy, Japan and the United Kingdom, we cover January 2010 to July 2025 and assess event effects using correlation paths for June 2024–June 2025 and symmetric ±30-day windows. We employ a DCC-GARCH model to jointly estimate conditional variances and dynamic correlations for six USA-G7 pairs. The results indicate persistent correlation dynamics, with Canada/USA the highest and Japan/USA the lowest. Election-related uncertainty is associated with declines in correlation for European pairs, suggesting temporary decoupling, while Canada and Japan show only small changes. By contrast, the tariff action shock significantly increases conditional correlations across all country/USA pairs, implying stronger market synchronisation, with the largest increases in North America and parts of Europe, and the smallest adjustment in Japan.
Czech et al. (Fri,) studied this question.