POTUS 47

Investing under Trump 2.0

Investors should prepare for near-term market volatility and focus on diversification and hedging strategies.

What does President Trump mean for markets?

We do not expect sustained blanket universal tariffs, but highly aggressive US tariffs would almost certainly trigger retaliation by US trading partners and there are risks of a tit-for-tat ratcheting up of measures. More volatile markets require an increased focus on portfolio diversification and hedging approaches.

Investment view

We continue to expect the S&P 500 to rise by year-end. If tariffs on Mexico and Canada are not sustained, we believe US economic growth will continue to support equity markets and that AI will remain a powerful tailwind. Investors should focus on portfolio diversification and consider hedging tools.

Related insights

Markets rebound as Trump outlines reciprocal tariffs

Stocks and bonds both rallied on Thursday after US President Trump signed a directive on reciprocal tariffs but stopped short of imposing immediate measures. While the delay in implementation limits the immediate market impact, the risk of retaliation remains.

VP Vance threatens sanctions, military action over peace deal

US Vice President JD Vance threatened both economic and military “tools of leverage” against Russia if a peace deal is not reached that ensures Ukrainian independence. Our base case is for a ceasefire to be reached during the year, though negotiations may be protracted given the lack of trust and distance between desired outcomes.

US President Trump orders more tariffs

US President Donald Trump announced a new 25% tariff on all steel and aluminum imports on Monday. Despite rising tariff risks, we still expect that a solid US economy, AI tailwinds, and gradual Fed rate cuts will offer a favorable backdrop for equities. We continue to expect the S&P 500 to end the year higher.

US President Trump reimposes "maximum pressure" on Iran

So far, the oil market has reacted in a muted way to the announcement. Market participants will likely wait to see how current sanctions are enforced before anticipating production disruptions in Iran.

FAQs on tariffs

Equities started the week on a volatile note after reports that the Trump administration pushed forward with plans to impose higher tariffs on Canada, Mexico, and China. However, stocks recovered some ground Monday as the White House hit pause on tariffs on Mexico and Canada for at least 30 days. While uncertainty remains elevated, we answer some common questions on investors' minds.

New in recent weeks

The US dollar fell to a two-month low as no immediate levies were imposed following President Donald Trump’s directive on reciprocal tariffs. Part of the losses also came from a strengthening euro, which was supported by Trump’s efforts to start negotiations about an end to the war in Ukraine that is approaching its fourth year.

President Donald Trump said he will announce 25% tariffs on all imports of steel and aluminum, without specifying when the duties would take effect. He also said he would announce reciprocal tariffs later in the week on countries that tax US imports.

Significant tariffs on imports from Canada, Mexico, and China are set to be effective 4 February. Duties levied on Canadian “energy resources” will face a lower 10% tariff, although Mexican energy imports will face the full 25%. In response, Canada's government has announced a 25% tariff on some US imports, Mexico has ordered retaliatory measures, and China's foreign minister has vowed to take “necessary countermeasures.”

Events

February House View Livestream

Since Donald Trump won the US presidential election and the Republicans gained control of Congress, long-end government bond yields have increased, the dollar has strengthened, and equity markets have become more volatile. With potential tariffs on the horizon and a policy agenda that could have significant macroeconomic repercussions, you may be wondering if there are implications for your portfolio.

Watch the replay of the Chief Investment Office’s discussion on the executive order Trump signed to impose additional tariffs on imports from Canada, Mexico, and China, the implications for investors, and more. The event was hosted by Amantia Muhedini and featured David Lefkowitz, Head of US Equities, Leslie Falconio, Head of Taxable Fixed Income Strategy, and John Savercool, Head of Governmental Affairs US.

Did you know?

  • Mexico and Canada together account for about 30% of the US’s total trade, more than twice the share of direct trade with China (12%).
  • US Treasury Secretary Scott Bessent is reportedly proposing a gradualist approach on universal tariffs, starting at 2.5%, with a monthly step-up of 2.5 percentage points until they reach as high as 20%.
  • Beijing’s potential stimulus in response to tariffs could help mitigate the impact, while US imports from markets like Taiwan and South Korea are not easily replaceable. In addition, most US sales by European companies are from goods and services made in the US.

Get in touch

Together, we can help you pursue what’s important