“The markets and the Trump revolution - or: those who say “A” must also consider “B””

Should investors with a long-term focus sit out the current market turmoil? Ali Masarwah reminds us that inactivity should not be confused with strategy, but neither should tactics be confused with hectic activity.

19 May 2025 FRANKFURT (envestor): “He who says A, must also say B” is a very German saying, of which I am not a fan, but which I find useful in view of the current market situation. This is - of course - once again about the US president and his influence on the markets. Investors tend to allow the daily roar on the stock market to have too much influence on their decisions. There is currently a lot of noise due to the daily Trump chaos. Every day in Washington, decisions are made, changed and rejected at breathtaking speed. Investors who invested after the so-called Liberation Day on 2 April presumably did better than those who reallocated their portfolio on 3 April. The Trump administration has rowed back on the punitive tariffs on a number of points. The wisdom has become established over the past decade: If you move, you lose! Strategy beats tactics. Is it the same this time?

I think not. However, tactics should not be confused with haste and strategy should not be confused with inactivity. After a good 100 Trump days, I have to say: MAGA-America represents a turning point - not only in international relations, but also for the capital markets. The shifts are real and tectonic in nature. The Trump disruption of international relations requires a reassessment of global markets. The era of US exceptionalism is coming to an end, both for equities and bonds and also with regard to the previous global reserve currency, the US dollar. But if we recognize that US assets are no longer the measure of all things (this is where the “A” comes into play), then we must also consider the consequences, at least as a plausible investment thesis (we have arrived at the “B”).

We should feel challenged to look at the markets with different eyes. However, this has not only been true since today. Tectonic shifts are also slowly taking shape. Our long-standing criticism of US-centric equity portfolios (keyword: MSCI World ETFs) has turned out to be correct. We have been systematically underweighting the USA in our advisory mandates for two years. Europe and China will be two new centers in an increasingly multipolar world, and this should result in a greater weighting of these two regions and countries in global equity portfolios. In turn, the performance of bond portfolios has benefited from allocating less to government bonds and more to bonds with risk premiums - corporate bonds, high yield, loans and CAT bonds. Those who have identified the US dollar as a risk factor will also exercise caution with Treasuries, which are highly weighted in global bond portfolios.