As we approach the end of June, investment markets are hovering near all-time highs. This is despite not knowing President Donald Trump’s next move on tariffs, with the 90-day reprieve from his April announcements soon to expire. His decision making process, which seems to be just as surprising to White House staff, means we’re always just one Truth Social post away from the next bout of volatility.
Several factors are contributing to the current market strength:
- Trump’s Inaction on Tariffs: Despite the initial announcements causing a 20% fall in the US share market, Trump has yet to follow through in the key markets that matter, like Europe and China.
- Global Stimulus Measures: New stimulus initiatives in Europe and China are helping the global economy adjust to Trump’s isolationist stance.
- Global Profit Growth: Expectations of stronger global profits, boosted by the anticipation of AI-driven productivity improvements.
- Inflation and Interest Rates: Inflation is slowly falling to target levels in most major economies, allowing for a gradual decrease in interest rates.
- US Fiscal Deficits: The increased likelihood of more domestic stimulation through larger US fiscal deficits as Trump’s “Big Beautiful Bill” progresses through the Senate.
- Federal Reserve Leadership: Anticipation that Trump will soon select an extreme monetary ‘dove’ from his inner circle to succeed Jerome Powell as Federal Reserve Chair in May 2026. Trump’s pick would likely have a clear agenda to lower interest rates above all else.
While these factors have bolstered markets, the sustainability of the last two is questionable. But the timing of any potential reckoning is unknown—it could be years away. Still, signs of nervousness are evident. Gold is reaching new highs and the US dollar and long term US bond markets are struggling.
In response our portfolio positioning has become more cautious. We are shifting away from large US companies, many of which are trading at extreme valuations, and focusing on smaller, value-oriented companies globally, as well as infrastructure and property investments.
If you would like more detailed insights, please reach out to us.
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