Equities
The tariffs on Canada and Mexico will come into effect as scheduled while the tariffs on China will be doubled. In the Middle East, Iranian response to any attack will threaten Middle Eastern oil supply. Meanwhile, Chinese fiscal support will surprise to the upside at the Two Sessions. But Trump's China policy will cause volatility. Now that the stock market is cracking, reinitiate defensive trades, such as long treasuries versus US stocks and long global defensives versus cyclicals.
Despite the broad market being expensive and overbought, value plays across US equity sectors exist. Real Estate, Communication Services, and Consumer Staples offer cheaper valuations with higher quality attributes relative to history.
Trump’s ceasefire talks are positive for Germany – and so was the German election result. But Trump’s tariffs will hit Germany soon. Investors should use near-term volatility to increase exposure to Germany.
