Tariffs

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.

US growth has slowed in recent weeks. This can be seen in the weaker data on retail sales, consumer confidence, services PMIs, and a swath of housing releases (notably starts, existing home sales, homebuilder confidence, and stock prices). It can also be seen in the decline in GDP tracking estimates. The Atlanta Fed's GDPNow model projects growth of 2.3% in Q1, down from a peak of 3.9% on February 3. The Citi US Economic Surprise Index has also dipped into negative territory.

This week’s report discusses the questions we were asked most frequently when we met with investors in the Midwest two weeks ago. We reiterate our pessimistic fundamental take and our neutral asset allocation recommendations.

The Trump administration posits that the world owes the US for the provision of its security. In this report, we perform a quantitative analysis to come up with a naïve estimate of the cost of that peace. More importantly (and more seriously), our qualitative assessment argues that save for a number of frontline countries that rely on the US defense umbrella, the vast majority of the world faces manageable security threats due to the complex multipolar global environment and a growing number of alternatives to the US security blanket.