Sarah Ruggins, Head of Investment Specialists, at St. James’s Place says: “Trump’s first 100 days of office, culminating with the recent “Liberation Day” tariff announcements, have had a significant impact on markets. The projected rise in the effective tariff rate is expected to exceed initial forecasts, which could have profound implications for inflation, GDP growth, and policy. If fully implemented, these tariffs could be the largest US tax hike in over 40 years. This would likely slow GDP growth and push unemployment higher, contributing to stagflation.
“We don’t expect to see an end to this uncertainty any time soon. Markets have the task of navigating the implications of Trump’s broader legislative pipeline that could influence corporate earnings, taxes, and regulations. While this uncertainty is likely to continue to cause unease among investors, history evidences the resilience of markets to political change. Therefore, as events unfold over the coming months, its vital that investors do not fall prey to short term volatility and instead focus on maintaining a diversified, disciplined approach over the long term.
“In anticipation of this uncertainty, we’ve taken proactive steps over the past year to enhance portfolio resilience. With inflation beginning to ease, and global growth showing signs of softening, we’ve increased exposure to government bonds across appropriate portfolios. This reflects the relative protection bonds offer compared to equities in a more challenging macro environment.
“We’ve also diversified our equity positioning. Specifically, we’ve reduced allocations to emerging market equities in favour of more developed regions such as the UK, Europe, and Japan. Given current valuations, the US appears expensive relative to the rest of the world, and as such, we are maintaining a lower weighting than its dominant representation in global equity indices might suggest.
“We are continually assessing the exposure of our portfolios to rate risk, inflation risk, and currency risk and are also exploring the inclusion of new asset classes, such as US TIPS, for portfolios where inflation protection may be beneficial. Additionally, we’ve been increasing our allocation to Japanese small and mid-cap equities—an area that has not only been historically undervalued but also tends to be more insulated from global trade tensions due to its domestic orientation.
“Crucially, these are not reactionary moves driven by short-term market timing. They are deliberate, considered decisions aimed at positioning portfolios to manage near-term volatility while continuing to capture medium-term opportunities.”
