David Ross, CFA, International Fund Manager, La Financière de l’Échiquier.
During his first 100 days in office, Donald Trump has orchestrated a series of wild policy U-turns that have unsettled markets and created a climate of uncertainty. By erasing any sense of normalcy, the President is threatening America’s reputation as a trustworthy investment ground—even weakening the safe-haven appeal of US Treasuries. Investors will have to be steady on their feet to navigate this new market.
The day after Donald Trump’s re-election, it was obvious: normal was over. You never know how it will be. And his entourage has changed. During his first term, he was still relying on old-style Republicans. Now, with the likes of Elon Musk and Peter Navarro whispering in his ear, nothing will hold him back.
Policy uncertainty driving higher risk premiums
Some investors clung to the hope of a pro-trade Trump agenda during the campaign and in the early days after the election, counting on lower taxes and less regulation. It was tempting to believe in the story of American exceptionalism. But once the tariffs hit, many were forced to reevaluate.
Since “Liberation Day,” we have seen markets start to price in the risk of erratic policymaking. One of the strengths of the American economy over the last 30 years has been its stability, with no big policy shifts. Now, American exceptionalism has come to an end.
The US dollar fell to its lowest level since 2022 in April [1], and gold has now gained nearly 25% since the start of the year. This level of uncertainty is new for the American market: historically, the country’s policies have been relatively stable, protected by the checks and balances system. Trump’s flood of executive orders, his willingness to bypass Congress, and his attacks on the Federal Reserve have made everything riskier.
The investor’s dilemma: to react or not to react
Trump’s return has made the job of a fund manager immensely harder. From a long-term perspective, we want to reanalyze positions based on profitability and the potential impact of tariffs over the coming years. In the short term, with policy subject to change by the hour, meaningful analysis becomes impossible. We can only guess—and guesswork is not enough to make sound investment decisions.
A few months ago, we were still in a bull market, where investors “buy the dip.” But rising risk premiums on US assets have shifted market sentiment. We are now in a bear market scenario, in which the mindset is: “sell the rip.”
The S&P 500 has now made several attempts to break through the 5,400 level in recent weeks. Today, we are setting that level as our new ceiling. And because the biggest rallies happen in bear markets, my advice to my team is simple: don’t get crazy, be very cautious.
Not throwing the baby out with the bathwater
A complex investing environment is still interesting for an investor, especially as tariffs make some companies more attractively priced.
Microsoft, for example, will not really be impacted by the tariffs. Amazon also remains an opportunity from a long term perspective: around half of its sellers are Chinese, [2[http://#_ftn2]] but its world-class logistics expertise and network will allow them to gain market share in the long run.
Industrial companies, on the other hand, are under immediate pressure to cut costs, which could have an impact on their profitability in the long term.
Toning down growth expectations
Since January, Donald Trump has used and abused the “trial balloon” strategy: announce a new, radical policy, observe the reaction, then decide what to do about it. We saw that with the tariffs, now paused for three months, and with his attacks on Jerome Powell, the President of the Fed, backpedaling when faced with backlash.
In the next months, markets will grow more discerning, learning to separate genuine policies from distractions. Trump is a master of diversion, and investors will realize they need to take a step back and resist reacting to every headline. His first move is rarely the final move.
Companies will have to put their capital spending on hold, and investors will have to consider the impact on US growth, to temper their expectations for American growth, and, by extension, global growth.
Donald Trump should not be taken literally, but he must be taken seriously. Investors have to get ready for four years of executive orders —an environment rich with potential opportunities, but one where caution will be essential.
[1] U.S. dollar falls to three-year low as Trump’s Powell threats further dent investor confidence, CNBC
[2] Chinese sellers on Amazon to hike prices or exit US as tariffs soar, Reuters
