GeoMacro

Special Report

The US and Canada will resolve their trade dispute quickly, leading to a North American deal and better prospects for future relations, as well as for other US trade deals around the world. But even as tariff threats decline, the US economy will slow, weighing on its neighbors. Canada will fare better than Mexico.

The US will continue to lead global trade, but the past winners from China-US tensions face decline. Reglobalization is underway. India Port Infrastructure will be a long-term winner.

Special Report

Cybersecurity is a strategic investment theme, which looks particularly interesting in light of the trade war and heightened geopolitical tensions. It is less exposed to tariffs than other industries and, if anything, benefits from geopolitical tensions as customers seek protection from international cyberattacks and cybercrime. The industry’s fundamentals are improving, while valuations are moderating. A recent pullback presents an attractive entry point into the theme.

Special Report

Do not play the bounce in US and global cyclical assets as Trump backpedals from the trade war. China will talk, but the pace will be slow and the outcome disappointing. Fiscal stimulus will surprise marginally in the EU, China, and even the US, but still may not rescue the business cycle.

Special Report

As high-stakes US-Iran negotiations begin, investors face yet another geopolitical risk, on top of tariffs and trade war. In this collaborative project, we combined BCA’s scenario analysis, probabilities, and financial market impacts with Axioma/Simcorp’s advanced risk analytics platform to produce a valuable contribution to risk management.

Special Report

Upgrade the odds of a full-scale war in the Taiwan Strait from 5% to 10%. Rapid escalation of US-China economic war raises the probability of tensions spilling into the military-strategic domain. Investors should buy insurance against this tail risk while it is cheap. Meanwhile, use this year’s trade shock and equity volatility to increase allocation to EM manufacturing states.

President Trump keeps walking back his tariffs, aligning with our Seven Steps of Maximum Pressure. Investors should expect a lot of back and forth over the next few weeks, including the dreaded Step 5 (“Leave the Bride at the Altar”). Already, Commerce Secretary Howard Lutnick has suggested that the tariff exemptions for electronics – which surged global risk assets today – would not last long. We hesitate to just declare the “all clear” and go outright long but are shifting our posture on global risk assets to neutral.

While the market welcomed the pause in Liberation Day tariffs, we believe investors are overly optimistic about the relief from this Trump-driven uncertainty. Even with the pause, current tariff levels remain higher than they were in January. Elevated tariff levels are likely to be inflationary, which could explain the recent spikes in US Treasury yields. Currently, Congress does not have a veto-proof majority to rein in President Trump’s tariff policies, meaning the trade war with China will persist.

The world is focused entirely on the trade war between the US and… well everyone. This is fair given that there has been no greater market catalyst than Liberation Day since the pandemic. However, we continue to stress that the BIG PICTURE for macro investors is the rotation out of the US. A rotation that started well before April 2, despite the understanding of the investment community that some tariff action would be afoot.

President Trump imposed tariffs on the world in his first 100 days, as we expected. Tariffs may have catalyzed a recession in the US, given the weakness in consumer sentiment and demand. Trump will soon backpedal and grant exemptions to countries that are negotiating, which he will showcase as proofs of his successful trade policy. While he may backpedal on his tariffs on other countries, China is not likely to receive the same treatment due to the US-China strategic competition.