The United States market is still an uncertain bet for investors despite having returned to the levels it was at in early April as the long-term impacts of the see-sawing tariff policy have yet to play out, a global investment firm has pointed out.
Axa Investment Managers core investments chief investment officer Chris Iggo said while US markets have returned to the levels they were at before 2 April and sentiment is positive, these were only surface level indicators that should be looked past.
“The thing is, we don’t know quite how the macroeconomic outlook has changed. It is surely worse in terms of growth and inflation, at least for a while,” Iggo said, noting the imposition of tariffs in early April and their reduction for major US trading partners had created ongoing uncertainty.
“I’m not sure that I have seen such swings in sentiment amongst market participants and economists. Based on what we know today, tariffs are going to be historically high.
“American companies relying on imported consumer goods for resale or industrial inputs will be paying higher prices and still might not have the certainty they require to plan output and investment, or the ability to maintain profit margins.
“The only meaningful factor that has improved is sentiment, driven by announcements of ‘trillions of dollars’ of deals done by Trump. Sentiment is fickle though. It could turn sour when the reality of weakening economic data becomes evident.”
He pointed out US shares have become very expensive and while some may believe US exceptionalism will continue to deliver high returns and drive strong capital inflows from outside the country, recent events had cast some doubts on these assumptions.
“Various policy puts from the US government and the Federal Reserve, the monetisation of fiscal expansion and the rapid growth of the technology sector have created the exceptional rise in equity valuations, helped by the confidence that the rest of the world had in investing in the US,” he said.
“Now the market is very expensive and perceptions might have changed.
“There has not been enough time since the tariff debacle for the real economic data to show whether any damage has occurred. Anecdotal evidence suggests there has been some.”
''