Investors' Outlook: Checking for storm damage

Checking for storm damage

Tariffs remain one of the most disruptive forces in global markets, and while the winds have calmed, we’re still far from understanding the full extent of the damage. Markets now sit in uneasy stillness after the eye of the storm has passed, leaving uncertainty in its wake.

It was the bond market that ultimately nudged US President Donald Trump to pause his aggressive strategy, a quiet rebellion from fixed-income investors amid rising yields and rattled confidence¹. But this pause offers little reassurance. The ongoing uncertainty has also shaken faith in another traditional safe haven: the US dollar. Gold, by contrast, has surged even higher as investors search for shelter. And markets continue to be highly reactive: Trump lashes out at US Federal Reserve Chair Jerome Powell, and markets wobble². He walks it back, and they rebound³. We seem to be in an environment where sentiment outweighs substance, and for investors, that may be a cue for caution.

We remain in a holding pattern, holding firm in our view that inflation is cooling, interest rates are poised to decline, and yields are likely to follow. From a macro perspective, we’re not bearish, but we’re cautious and are keeping cash on hand, scanning the horizon, and waiting for better visibility. That clarity is unlikely to come before the end of the second quarter, when we’ll have the earnings season behind us and, hopefully, signs of geopolitical de-escalation.

US equity valuations have come down, but they still aren’t cheap given there is a risk to further downward earnings revisions. The Multi Asset Boutique’s Investment Committee decided to refrain from making any changes to its asset allocation.

At this stage, we’re interested in damage assessment. How much confidence has been lost among consumers and small businesses – two cornerstones of the US economy? What are companies signaling through their capital expenditure (capex) plans? How are supply chains adapting to ongoing tensions with China? Until we have better answers, we believe it’s too early to call the all-clear.

We don’t think it’s the time for bold moves. A shift toward deregulation and tax relief may lie ahead and could be the break in the clouds markets are waiting for. But for now, patience and diversification are key to us, as we also keep an eye on upcoming trade talks and agreements. The Fed kept interest rates unchanged, emphasizing no rush to cut amid heightened uncertainty surrounding the economic outlook.

In this Investors’ Outlook, we unpack Trump’s “Make-America-Great-Again” ambitions, examine the message from the bond market, and zoom in on the gold rush.

The skies may be clearing, but before rebuilding, we have to know what's been broken.