Trump’s trade war continues to send tremors through the global economy, shaking the foundations in risk assets. While the rotation away from risk assets gathers momentum, we recommend a return to fundamentals to pick the winners in the mega-cap tech stocks that still have room to run. So ditch the doomscrolling and dive into our latest newsletter for investing and trading insights you can use.
Trade war worries
As Trump continues to wage his tariff war, investors are reassessing their risk expectations, with US policies becoming a stronger headwind for risk assets. Economists are warning that tariffs may hurt US growth, worsen inflation, and possibly spark recessions in Mexico and Canada. President Trump said 25% tariffs on Canada and Mexico are on track and said he would impose an additional 10% tax on Chinese imports. Trump’s threats to increase restrictions on China’s chip industry are also fuelling concerns around a wider trade war, with possible copper tariffs the latest in potential sector-specific levies.
Focus on fundamentals
DIY investors should take note of the divergence in performance across the magnificent 7, with Tesla (TSLA-NASQ) down -13.3% year-to-date while the likes of Meta (META-NASQ) is up +14% this year. In a world where asset allocators are increasingly questioning why the US should keep attracting investor capital, analysing a stock’s fundamentals will increasingly play a much larger role in picking specific winners rather than banking on broader exposure.
Concerned consumers
US consumer confidence fell in February by the most since August 2021 due to concerns about the broader economy. According to a Bloomberg report, the drop in confidence was broad across age groups and incomes, with consumers expressing pessimism about labour market conditions, incomes, and business conditions.
Sector focus: Energy & metals
If the war in Ukraine ends, energy markets may enter bear territory. While the probability of a near-term, US-brokered ceasefire has probably fallen following the drama that played out in the White House between US President Trump, Vice-President JD Vance and Ukrainian President Volodymyr Zelenskyy, a deal is ultimately likely. This will likely require an easing of Russian sanctions that offer the least moral hazard and the most immediate economic benefits. In this context, the energy sector looks to be the most impacted.
Natural gas prices are vulnerable to the return of Russian gas, especially in Europe, while the prospect of freer access to high-quality Russian coal in the European and Japanese markets will likely limit upside price potential, even if demand rises. Metal markets will likely experience less disruption from an unrestricted return of Russian platinum group metals (PGMs), aluminium, nickel, copper and cobalt, as Asian markets have already absorbed sizeable proportions of Russian metal exports. A subsequent revival in European industrial production geared towards self-defence and deterrence will have short- and long-term demand benefits for minerals critical to weapon production, like aluminium, manganese, cobalt, rare earth elements, graphite, titanium, tungsten, platinum, lithium, steel and copper.
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