Trump's Policies
President Trump is negotiating a ceasefire in Ukraine. This will be a marginal headwind to some commodities which benefitted from the conflict like natural gas and wheat, and will be a marginal tailwind for European assets, specifically EM Europe. Use Trump’s tariff shock as an opportunity to buy European assets.
The budget process and debt ceiling will cause stock and bond market volatility. US trade policies will provoke foreign pushback at a time of stretched valuations. Hence US politics and geopolitics will be bullish for US energy, but bearish for the internationally exposed US tech sector.
In his latest Thoughts Of The Day, Peter Berezin discusses the different moving parts of the global economy today and the potential impact of Trump's policies.
This week, our three screeners focus on providing equity insights based on the impact of tariffs, and trade policy uncertainty in general, helping clients identify stocks exposed to these shocks.
All the growth in the US labour supply since mid-2023 has come from immigration. This means if net immigration comes to a grinding halt, as Trump wants, it will hurt economic growth as well as keep the labour market supply-constrained. An increase in productivity growth could save the day, both to maintain growth and to kill inflation. Yet hopes that AI is about to usher an imminent and sustained boost to productivity growth are misplaced. Hence, expect a slowdown in US growth combined with inflation stuck close to 3 percent, a combination that I call a ‘mini stagflation’. We go through the investment implications. Plus: Tactically overweight Portugal versus Europe.
We revisit our view on the “fiscal gravy train” as well as President Trump’s negotiating style. We re-print parts of our March 2024 net assessment, particularly for the benefit of our new clients who have joined us at BCA Research. Our analysis of President Trump’s first term is our guide into how the White House will negotiate future trade wars and skirmishes.
Trump’s territorial ambitions threaten to deliver negative surprises and “black swan” risks during his four-year term. Military conflicts on the Mexican border raise the biggest risk, but US intervention in Panama can never be ruled out. The investment impact will be limited unless the trans-Atlantic alliance is damaged.
The 10% tariff hike announced on Saturday will likely serve as the opening salvo in a broader wave of protectionist measures. In this report, we assess the increase in US import tariffs on China. While the direct impact on China’s overall economy may be manageable, the country’s economy faces significant risks from potential disruptions in global trade.
Markets and forecasters anticipate a “Golden Age” for Trump’s America, with US growth expectations soaring while the rest of the world lags. However, this extreme optimism means that there is a lot of room for disappointment. Cooling income growth, weak housing and less deficit spending than expected will result in US growth underperforming expectations. Maintain a modest underweight to equities and modest overweight to fixed income. US markets have become more expensive relative to the rest of the world even as quality differentials have stabilized. Prepare to downgrade US equities to underweight and to upgrade Euro Area and China to overweight. We will wait to pull the trigger until we have more clarity on trade policy and when the dollar's momentum turns negative.
Should investors take seriously the possibility of Canada becoming part of the US? We strongly argue that such a union is not in the cards. Conservative America will fight it tooth and nail, despite President Donald Trump’s suggestions. There is no mythical “conservative Canada.” The entire country is as liberal as the state of Vermont, with Alberta only as conservative as Minnesota. However, in the very long term, the probability is not zero.