Monthly Market Outlook: 100 Days of Chaos

Monthly Market Outlook

It’s been 100 days of President Trump’s second term in office, characterised by much more stock market volatility than usual.

Global events and economic concerns have heavily influenced market moves. The revival of major trade tensions - first with China, Mexico, Canada, and Europe and then extending globally - and signs of slowing US growth have tested investors’ nerves. But even though Trump’s trade tariffs have raised the spectre of recession, we think investors should not be too quick to write off the USA.

Unlike his first term, Trump’s second term has begun with policies that marketsdon’t like because they could hurt growth. More market-friendly policies such tax cuts and deregulation are expected to be announced later in the year. Investors are also increasingly cautious about valuations (how much a company’s shares are deemed to be worth) of US stocks, especially technology companies. This may be because they feel Trump 2.0 cares less about boosting the stock market than he did during his previous term.

In contrast, European equities have benefited from growing optimism around higher defence spending across Europe, major government spending in Germany, and hopes for peace in Ukraine, which could also bring down energy costs.

Large European companies have performed better than their US rivals so far this year, and they also look cheaper. Does this mean European stocks will beat the US for the next few years? Not necessarily. If you look at what really drives company profits and economic growth, we think it’s too soon to count the US out.