Market Update

President Trump Tariffs – a short explanation.

Donald Trump has looked to address the perceived imbalance in US trade amongst its global trading partners in his announcements on ‘Liberation Day’. This has resulted in a range of import Tariffs on certain goods being imported by the US. The comments and tariffs have led to a correction with global stock markets falling sharply.

Financial Markets falling – Why would this be?

In short, Liberation Day has served as a catalyst for other countries to retaliate by announcing their own increasing tariffs on US. The protectionist policies from all have led to uncertainty on pricing, global trade and growth expectations. For investors, the uncertainty in the supply chains, movement of goods and the ability of companies to meet forecast earnings has been curtailed. For central banks and governments, a renewed focus on fiscal stability is the core once again.
The declines have been global in impact and the US equity market has not been immune to the falls. The declines have been the hardest in the US with the global market following suit. This brings into question the true appetite for the average American to see their wealth fall and face higher costs. Political intervention in capital markets is never welcome in an industry that benefits from fundamental analysis and political freedom.

The US Economy impact: Consumer to Manufacturer

Under the new tariffs President Trump is looking to address the ease at which foreign companies can sell into the US. By example, foreign motor manufacturers have been able to export cars into the US with minimal tariffs whilst US manufacturers face higher tariffs to export out of the US. The imposition of tariffs makes foreign goods more expensive in the US, forcing up prices for the US consumer, who had been buying foreign cars. The Trump Government is keen to onshore manufacturing to make ‘American’ products for the US consumer. The competitiveness of the US to domestically manufacture goods as cheaply as the Far East will take some time to achieve. In the short-term higher prices in the US may stimulate inflation and the economy may struggle to grow.

Tariffs: A UK Perspective

From a domestic perspective the UK has been given the lower level of tariffs at 10% in the recent announcement. The lower tariff reflects the current breakdown of UK trading with the US, which is more complimentary being services led rather than manufacturing. Like all countries and trading blocks the UK is likely to be in negotiation with the US to agree a better settlement. We believe that a negotiated outcome with the US is the most likely outcome for the UK in addition to domestic stimulus to offset some of the impact amongst the UK exporters. The UK economy faces several headwinds and rate cuts may help stimulate growth.

ASAM: Portfolio Activity and Outlook

Within ASAM we have been refreshing our US exposure in favour of a more global approach on fundamental and valuation perspectives. Where we do have US exposure, we have reallocated to companies that should benefit from growth in the US domestic economy. Our client portfolios have not been immune from the declines in value over the past weeks. History shows the US market corrects by 15% once every three years* and we should not dismiss the fall in equity value during the pandemic and the recovery thereafter. We believe the current volatility and declines should stabilise as the impacts from President Trump’s influences are fully priced into markets. Whilst the volatility is uncomfortable in the short term, within ASAM we invest into a diversified pool of assets. This diversification can offer a degree of protection in periods of stress from a single asset class. At present the repricing of equity markets should provide some attractive opportunities when the volatility subdues.

Next Steps…

In periods of stress in markets often the best outcome is not to act in haste. We will continue to invest client capital into a diverse set of opportunities that best adapt to the changing circumstances in markets. Should you have any questions or concerns at this point we would encourage you to get in touch with your financial planner in the first instance.

Source – First Trust Q4 2024 Resource Pack

Anderson Strathern Asset Management Limited is Authorised and Regulated by the Financial Conduct Authority.

Please keep in mind that the value of investments can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. Anderson Strathern Asset Management Limited are not authorised to provide tax advice, and information supplied should not be relied upon for tax, accounting or legal advice