Since President Trump’s inauguration, the flurry of executive actions and foreign policy initiatives are nothing short of spectacular. When asked by the Wall Street Journal about the President’s first few weeks in office, David Axelrod, the former adviser to President Obama perhaps summed it up best: “I think he will get credit in the short term for being a whirling dervish of activity,” he said referring to a wild, erratic religious dance ritual popularized by Muslim Sufis. “The question is, what does that activity produce?”
As stock pickers, we typically eschew commenting on macroeconomics or geopolitics. Since at least the 2008 financial crisis, the investment landscape has changed, and we need to adapt our process even if at the margins. Most of us were forced to consider actions by central banks or government directed economic policies or geopolitical convulsions. There are pivotal moments when these factors (rather than specific stock attributes) influence and even alter investing landscapes.
This month is when a quote from the Russian theorist, Vladimir Lenin, feels apt: “There are decades where nothing happens; and there are weeks where decades happen.”
It sure feels that way today. Kicking off his second term and citing unfair economic burdens, Trump immediately withdrew the US from the Paris Accords, an international treaty formed to address climate change, and issued executive actions to accelerate oil drilling and reverse many of the DEI initiatives of the Biden era. Collectively, these actions signal that Trump may very well push ESG principles to the wayside. Free trade and globalisation will likely be fettered by tariffs and transactional diplomacy in the new game in town.
Last week in Europe, speeches by Vice President J.D. Vance and Defense Secretary Pete Hegseth have rudely shaken European contentment. President Trump has initiated dialogue with Russia about potentially ending the war in Ukraine, leaving the Europeans as bystanders. It’s possible that Europe will be weaned away from US security guarantees.
President Trump discussed inviting Russia back into the G-8. With Trump floating the potential of economic deals there, Russia might become investible again. Two of the country’s largest trading partners, Canada and Mexico, have been placed on a similar pedestal as the US’s long-perceived archenemy, China.
Trump’s approach seems to be antagonistic to one and all, perhaps more so toward US allies. His desire to impose tariffs on Mexico and Canada (still unclear if or when they will proceed), appear in sharp contrast to market expectations that China would be the first target, with potentially much higher tariff hikes at 60%.
RISK CONSIDERATIONS: The strategy invests in international and emerging markets. International investments involve special risks, including currency fluctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Such risks include new and rapidly changing political and economic structures, which may cause instability; underdeveloped securities markets; and higher likelihood of high levels of inflation, deflation or currency devaluations .
The views expressed are those of the portfolio manager as the date of posting, are subject to change, and may differ from the views of other portfolio managers or the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice.
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