Trump 2.0: Market Impact and Investment Considerations

In a previous update, we highlighted concerns about the US's dominance within the MSCI World Index and the risks of being too heavily weighted toward US equities. These concerns remain relevant with Trump’s return to power, particularly given his high-stakes negotiation style and economic policies.

Trump: Market Sentiment & Volatility

The Fear and Greed Index, a key measure of market sentiment, initially rose upon Trump’s re-election but has since declined and remains below 50. Market volatility remains a crucial factor, with the VIX Index—a standard market stability measure indicating potential turbulence ahead.

US Trade & Economic Risks

The US economy remains deeply interconnected with global trade. Approximately 40% of US imports come from Canada, China, and Mexico, while US exports total $2.1 trillion annually, with a similar percentage heading to these countries. The European Union accounts for another 17% of US exports.

Trump's protectionist policies could increase tariffs against the US, driving up prices and fuelling inflation. His push for US-based manufacturing may also disrupt global supply chains, creating uncertainty for businesses and investors.

What This Means for Markets

Increased Short-Term Volatility: The VIX Index suggests that volatility below 20 is stable, while readings above 30 indicate heightened risk. Any sharp spikes should be closely monitored.

Stock Market Strength: A key indicator is the ratio of NYSE stocks hitting 52-week highs vs. those at 52-week lows—a critical measure of investor sentiment. Currently, this signals extreme fear in the market.

Investment Strategy: Thinking Long-Term

Successful investing is about long-term growth (5–10 years), not short-term speculation. Trump’s policies could introduce uncertainty, but markets have historically adapted. While US equities remain overvalued compared to other global markets, timing an exit too early could mean missing key opportunities. Diversification remains essential to managing risk while capturing potential upside.

Bottom Line: Trump’s return could drive market uncertainty, but investors should focus on long-term returns, sector strength, and geographical diversification to navigate uncertainty. The question remains—who blinks first?

Risk Warning: The value of investments can go down and up, and you may not get back the amount you initially invested. Past performance is not a reliable indicator of future results. Diversification does not guarantee a profit or protect against loss. Always seek professional financial advice tailored to your circumstances before making investment decisions.