United States
Trump's Tariff D-Day brings a negative surprise to financial markets already anxious over a declining US cyclical economy. Investors should sell risky assets, increase safe havens, and overweight US assets in the near term.
Trump’s foreign policy has been the focus for investors over the past few months. But is it really the underlying cause of the selloff? Market dynamics suggests that tariffs have only been a catalyst. In our view, investors should not focus on the man – Trump and his policy preferences – but should instead focus on the macro. Specifically, we outline three trends that will matter over the cyclical horizon: valuation and policy differences between the US and the rest of the world, the collapse of US animal spirits, and how the AI narrative has begun to crack. While markets could whipsaw around “Liberation Day,” this will only be the opening salvo of the negotiations. We believe that investors will be better served by focusing on these three forces – none of which are positive to risk assets. Remain defensively positioned.
