We do not expect large, broad, and sustained US tariffs, but repeated threats of higher tariffs on key trading partners and a lack of policy visibility could weigh on business investment and hiring even if they are never imposed. More volatile markets require an increased focus on portfolio diversification and hedging approaches.
Investment view
We have cautioned that volatility is likely to be higher this year due to policy uncertainty and trade frictions, but we reiterate our view that the bull market is intact, and we expect US equities to end the year higher. Investors should ensure portfolio diversification and consider hedges to navigate volatility ahead.
Bloomberg reported that President Donald Trump’s coming wave of tariffs is poised to be more targeted than the barrage he has occasionally threatened. According to officials cited in the report, Trump will announce widespread reciprocal tariffs on nations or blocs but is set to exclude some.
The S&P 500 rose 2.1% on Friday on progress towards a US funding bill to avert a government shutdown through to September. US President Donald Trump over the weekend signed the bill into law. Separately, Trump said he sees a “very good chance” for a Russia-Ukraine ceasefire, with a call with Russia's Putin reportedly scheduled for Tuesday.
In a nod to mounting growth and tariff concerns, President Trump on 9 March predicted “a period of transition” for the economy when asked about recession risks, while Treasury Secretary Bessent warned “there’s going to be a natural adjustment as we move away from public spending to private spending.”
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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%).- We believe that President Trump will be willing to seek “deals,” particularly if US economic activity is potentially at risk from failure to agree, and if counterparties show a willingness to offer concessions. The action on tariffs thus far shows how threats can be escalated, only to be subsequently de-escalated.
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