Our Thinking (not advice)
Since the last report in early January, the world has turned upside down. The America First policy along with the initiation of a trade war against the world is like a bull in a China shop. The most used word since Trump’s inauguration is “uncertainty”. No one really knows what the path to the future is, and furthermore, no one can be certain about the destination either.
Our first quarter commentary offers what we believe are the Trump Administration’s objectives and what some of the likely macro changes are. However, due to the capricious nature of policy decisions thus far, we cannot be sure that any action is permanent, and the fan chart of probabilities remains wide. This makes decision making about capital investment for individuals and businesses very challenging. With plunging consumer and business sentiment and higher expectations for inflation, the economy is likely going to weaken further. A recession is not our base case for 2025 (two quarters of back-to-back negative GDP with spiking unemployment).
We offer the following thoughts (not advice):
- Affirm investment objectives and time horizon,
- Separate short term (1 to 3 year) liquidity needs from long-term investment (5 years plus) goals,
- Upgrade each holding within its asset class to the highest quality where possible,
- Park in safe assets for the short-term liquidity needs, and
- Diversify away from a super concentration in U.S. (home bias) assets and U.S. dollar dominance. There is increasing evidence that foreigners are diversifying away from their concentrated U.S. positions.
Click here for the full commentary.