MacroResearchBoard

Trump 2.0: Diverging From 1.0? – March 3, 2025

A just-published report updated our global investment strategy, which included tightening stops on pro-growth positions given the mounting anxiety over U.S. trade policy. In contrast with President Trump’s first term, when positive economic policies were enacted before trade tariffs arrived, this time Trump is leading with mostly negative policies.

In fairness, he is still constantly shifting his narrative, making it difficult to anticipate the likely economic outcome. The U.S. economy had a solid head of steam heading into Trump 2.0 which will not be easily undermined. And the global economy has been slowly firming and can weather some (modest) trade headwinds. Still, the business sector does not thrive if high uncertainty persists.

Moreover, a key issue in last year’s U.S. election (and elsewhere) was the huge increase in consumer prices this decade. If some U.S.-led tariffs occur, as seems probable, it will reinforce the uptrend in consumer prices and further disenchant voters (putting solid U.S. consumption growth at risk).

At least a moderate period of risk-off (and possibly several such episodes) loom, as trade tariffs are applied and retaliation occurs. Such setbacks should not derail the positive cyclical corporate profit backdrop. However,  we are not dogmatic in terms of our overall multi-asset allocations: if the facts change and it appears that the business sector will retreat, then we will de-risk.