Trim Capital’s first edition of Asset Allocation Strategy highlights the growing market instability caused by US trade policies, geopolitical tensions, and shifting economic fundamentals.
Trade Wars and Policy Shifts
The Trump administration’s aggressive trade stance is disrupting markets:
- 20% tariffs on Chinese imports (up from 10%)
- 25% tariffs on steel and aluminum
- Potential new tariffs on Europe
US economic policy shifts—immigration cuts, stalled corporate tax reforms, and shifting foreign aid—have added to uncertainty, impacting both investor confidence and market sentiment.
Investment Strategy: Defensive Shifts
- Overweight global sovereign bonds as economic growth slows
- Underweight high-yield credit due to rising risk spreads
- Favour Japan and Europe over US and Australian equities (better valuations and earnings outlook)
- Increase exposure to infrastructure and global property
Key Risks and Market Outlook
- US consumer spending is the key wildcard—resilient so far, but confidence is slipping.
- The US 10-year bond yield has fallen by 40bps, signaling slowing growth concerns.
- The Fed may be forced to cut rates earlier if tariffs weaken economic activity.
- Australia remains vulnerable, with iron ore prices at risk from slowing global steel demand.
Final Takeaways
- Prioritise defensive assets – bonds, infrastructure, and property.
- US and Australian equities face risks, while Japan and Europe offer better opportunities.
- Watch the US consumer and Federal Reserve actions for market direction.
For the full report, click here.
