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The second act of HamiltonThe award -winning musical representing the life of one of the American founding fathers, presents a song entitled “La Salle where it happens”. The scene focuses on the economic arrangements of the new United States, as agreed by Jefferson, Madison and Hamilton himself in 1790.
Rapid advance of 235 years and it was Donald Trump, Peter Navarro and who else in the room where it happened? Many people claim to have been present when the big PricingAnnounced on April 2 was done, but their inability to explain the justification behind them suggests that they were elsewhere – or that the policies are inexplicable.
Perhaps more interest are suggestions that there were some that were certainly not there, but knew in advance of the April 9 decision to suspend most of the “reciprocal” prices and acted on this knowledge. This is certainly a short -term challenge if the initiates are negotiated ads, but that does not affect the value of long -term actions much.
Long -term investors can be more comforted with the fact that anyone benefited from the tariff break, it was caused by the American bond market. This is a huge problem for Trump 2.0 and his pricing ambitions.
THE American federal debt is an amazing $ 36 billion – more than 120% of GDP. The tax discounts that Trump has promised in the elections could add 4.5 TN to this – debt to 137%.
There are statements that prices increase significant income, but it is more likely that there will be fewer imports. Immediately after the fall in bond returns of April 2 – generally a sign that investors think that a recession is coming. Well, consuming less is certainly a way to reduce the trade deficit.
Since then, they have increased. This does not mean that recession fears have relaxed. Rather, this means that the bond market looks at the number of obligations to be issued and fears that this is an unusual recession – with prices supplying inflation when the recession would cool it. In short, they want more award to stay with us, treasury bills.
I started to invest in the early 1980s, and neither my colleagues nor I have witnessed the days preceding the partial ascent of Trump on April 9. We have seen crises, accidents and inflation shocks. Sometimes we disagree with American economic policy. We never went so far as to call it “disturbed”.
Maybe Trump will come back more. However, even if judicious compromises are found, the events of the last two weeks have surely damaged the confidence that companies will have exchanges with the United States and access to American companies will have in the rest of the world.
So how should investors act? I and others have been warning for some time the risks of having too much of your wealth in a world index tracker. A dozen years ago, American actions represented a little less than half of the world index; Recently, this figure reached more than 70%. It seems out of money with the United States of world GDP.
American companies have often seemed more profitable than their peers in other countries, but some of the highest margins can come from their large domestic market and easy access to foreign markets. Maybe these days have ended. The reduction of exposure to the United States and the more inclination to European and Asian actions seems reasonable.
Some investors could still be tempted to buy technological actions from the United States that fell on the decline. I have no desire to bite into the apple. It seems extraordinary to me that this huge business had no substantial plan to move production outside China. Nervous investors could watch NVIDIA and ask him why he did not encourage his manufacturer of Taiwanese chips, TSMC, to build a factory in the United States much earlier. TSMC is about to start production in Arizona, but it will only be five million chips and is delayed. The faster chips that Nvidia needs can come from new generation manufacturing factories, estimated at more than $ 50 billion and perhaps opening in 2029 – but Trump tries to reduce his contribution.
Any gathering in technological actions could be challenged by the EU response to prices. The “bazooka” may include EU sanctions on American companies. Perhaps the EU also suggests that these companies pay taxes.
Too much risks? It is logical for me not to abandon, but to move away from the United States and multinational superpower technology societies. These will undoubtedly be affected the most by a more protectionist world. Instead, you could look for “regional champions” less affected by prices.
An example that we have been holding for some time is Wolters Kluwer. It is a Dutch information services company which, among its services, offers digital access to lawyers for European case law.
Before all the tariff disorders, we bought Adyen, a European visa rival, and Mitsubishi Electric, which manufactures defense systems in Japan. We would expect the two to benefit from the modified landscape.
You might expect a rational supporter (probably an oxymoron) to be easy for pharmaceutical companies. The moving of the manufacture of medicines in the United States will take at least five years, therefore Gify the prices on drugs will simply add to the Medicaid invoice. I hold pharmaceutical products for the moment.
Finally, I come back to the “cockroach” stocks that I discussed last month. These are resilient societies that can survive any disaster or stupidity which is launched to them. Telecommunications actions, reinsurance assets and British property actions have resisted.
Confidence and confidence were damaged on April 2. Protectionism started during Trump 1.0 and was not unrelated to Biden – it just leaps forward under Trump 2.0. However, good companies last much longer than governments, and forts often become stronger during crises like this.
The coming months can see dark downgrades and the start of a recession, but the cockroaches and regional champions will cross it. As indicated in HamiltonThe key to “laughing” against the victims and sorrow “is” Thinkin 'Past Tomorrow “.
Simon Edelstest is a fund manager at Goshawk Asset Management
