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Its been an incredible run in the US stock market, with the highest level of international investment in US stock in history, justified by outsized returns in the MAG7. But what happens when the “Trump Trade” becomes the “Trump Trap”? more importantly, what can you do about it?
The market has had its third consecutive week of losses, largely attributed to the uncertainty surrounding President Trump’s new policies. This volatility has sent shockwaves through Wall Street and beyond, leaving investors and analysts scrambling to understand and adapt to the rapidly changing economic landscape.
The Catalyst: Trump’s Trade Policies
At the heart of this market turmoil lies President Trump’s implementation of sweeping tariffs on imports from key U.S. trading partners. The administration has imposed a 25% tariff on goods from Canada and Mexico, along with a 20% levy on Chinese imports. These aggressive trade measures have sent ripples through the global economy, sparking fears of a potential trade war and its far-reaching consequences.
Investor Concerns and Economic Implications
The market’s negative reaction stems from several key concerns:
- Inflation Fears: The tariffs are expected to increase the cost of imported goods, potentially leading to higher prices for consumers and businesses alike. This inflationary pressure could erode purchasing power and impact economic growth.
- Global Business Impact: Many U.S. companies have extensive international operations or rely heavily on global supply chains. The new tariffs threaten to disrupt these business models, potentially affecting profitability and growth prospects.
- Retaliatory Measures: There are growing concerns that affected countries may respond with their own tariffs on U.S. goods, further escalating trade tensions and potentially harming U.S. exporters.
- Economic Uncertainty: The unpredictability of the administration’s economic approach has left investors wary. This uncertainty makes it challenging for businesses to plan for the future and for investors to make informed decisions.
Sector-Specific Impacts
While the market downturn has been broad-based, certain sectors have been hit particularly hard:
- Technology: The tech sector, which had been a driving force behind much of the market’s recent gains, has experienced significant losses. This sector’s global nature makes it especially vulnerable to trade tensions and economic uncertainty.
- Manufacturing: Companies in the manufacturing sector, particularly those reliant on steel and aluminum imports, have seen their stock prices decline as investors weigh the potential impact of increased input costs.
- Agriculture: With the threat of retaliatory tariffs looming, agricultural companies and commodity prices have also faced downward pressure.
Looking Ahead: What can you do about it?
Step 1: don’t be afraid to take some profits
Its been a good run, in fact its been the best 2-year run since the 90’s, don’t get greedy. Start with your highest PE, growth orientated stocks that are barely profitable or have little room for any miss on future results. Long term winners like Pro-medicus PME are worth trimming with a strong moat, consistent contract wins and a bright future. Names like Life360 with an astounding $4b market cap are more of a sell, where analysts are talking subscriber numbers, revenue, but not the fact they make <$10m profit.
Step 2: set a plan and a write a shopping list.
Market downturns can be enjoyable….if you have cash. It’s the only place in the world where people get upset that the market is “On Sale”
Opportunities
Gold
Central banks are gobbling up gold like it’s going out of style, and with interest rates potentially dropping, gold’s looking even more attractive. The US Debt Spiral and uncertainty around a potential trade war will push people to the safety if gold
- Gold’s already smashed records in early 2025, cruising past $2,900
- Central banks are hoarding gold like squirrels before winter
- Lower interest rates could make gold shine even brighter
Asian Stock Market: Hidden Gems Galore
Now, let’s hop over to the Asian stock market. After 2-3 years of negativity, there are some seriously undervalued stocks just waiting to be snatched up. Add to this, Deepseek has really shown that China’s “Silicon Valley” is no second-rate San Francisco, they are cutting edge and investors are starting to notice. While Japanese companies have cash… and lots of it. No better place to hide in a market fall
- ASIA ETF: Betashares Asia Technology Tigers ETF
- CETF: China A50 ETF
- HJPN: Currency hedged Japan ETF
Remember, investing is a marathon, not a sprint and saving money is just as valuable making money. So take your time, be patient, do your research, and may the market odds be ever in your favour!
GENERAL ADVICE WARNING:
Recommendations and reports managed and presented by MPC Markets Pty Ltd (ABN 33 668 234 562), as a Corporate Authorised Representative of LeMessurier Securities Pty Ltd (ABN 43 111 931 849) (LemSec), holder of Australian Financial Services Licence No. 296877, offers insights and analyses formulated in good faith and
Opinions and recommendations made by MPC Markets are GENERAL ADVICE ONLY and DO NOT TAKE INTO ACCOUNT YOUR PERSONAL CIRCUMSTANCES, always consult a financial professional before making any decisions.
