Trump's Tariffs: A game changer or investment opportunity?
Key Takeaways
Escalating trade tensions: Trump’s new trade war, has dampened consumer, business, investor, and diplomatic sentiment, underscoring rising fears of a deep recession and stagflation. The elevated uncertainty has seen markets fall nearly 10% over the past week.
Confidence in a deal, despite volatility: Despite appearing more volatile in Trade War 2.0, Trump’s strategy of unsettling his opponents has set him up for the deal. With Trump and global counterparties not wanting a recession, and historical precedents indicating that a deal will be struck, we must look through the noise. In addition, the US's policy agenda is pro-growth - tax cuts, deregulation, and productivity - which given the Republican control of Congress, we have conviction can be achieved over the medium to long term.
Opportunities are present for long-term investors: Equity risk is cheaper amidst the volatility, with opportunity present for long-term investors. Duration arbitrage is present for patient long-term investors in quality companies that can look through the noise, in favour of sustainable through the cycle earnings. If history is a guide, patient investors will be rewarded from not being fearful in market routs like these. As discussed in the video, the Magellan Global Fund maintains its defensive tilt, but is leaning into opportunities presented by markets.
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