David Wheildon / May 2025
Just think of Mexico being told that it will be paying for “the Wall” or the Canadians/Greenlanders/Panamanians being informed that they will be annexed to the USA. This was news to those concerned and elicited an immediate defensive response in retaliation to these somewhat ambitious statements. In all three cases though it has moved the conversation in the direction Donald Trump wanted and may result in a final compromise that is far better for the USA than anyone might have predicted before the conversations started. I was advised by one of the investment companies recently that we need to take Donald Trump “seriously but not literally” and I feel this should sum up our reaction to his statements perfectly. He is not a fool (whatever our red top newspapers my suggest) and he is serious in his intention to promote the cause of the USA at the expense of all other countries. He was in fact elected on this basis and feels he has a duty to the electorate in addition to his own views so we must be prepared for more outlandish and dramatic statement over the next three and half years-or longer if he has his way! The statements will need to be backed up with action and businesses are already being encouraged to return their manufacturing to the USA; however this is far easier said than done I am told that Nike, for example, employ over half a million people in Vietnam to produce their shoes and sportswear. It is impossible to simply divest themselves of these employees and replace them with American employees in American factories in anything less than decades; particularly bearing in mind that the American factories aren’t yet built and there are not half a million skilled machinists currently idle and looking for work.
The dangers of unsettling other countries
Donald Trump does need to be careful though as the danger of unsettling other countries’ populations is that they can react aggressively. He may believe that he is the man with the golden gun, hitting the negotiating target every time without fail but he is in danger of misfiring. We hear, anecdotally, that in Canada shoppers are now using an App to read the barcodes of goods they are anticipating buying as the App will tell them if the item is produced in America allowing them to ignore it and consider a Canadian alternative. This kind of boycott or “righteous consumer action” could well have a greater impact on the American economy than tariffs imposed at a Governmental level. Further, this action could be felt across the entire American economy in a short period of time. There are mid-term American elections in the Autumn of next year and some Republicans are expressing concern the impact recent events will have on the economy and consequentially their ability to be re-elected. We wonder if Donald Trump has created all this “noise” and uncertainty around tariffs simply to enhance America’s negotiating position but he needs to be careful it doesn’t backfire and encourage unified action against America from the rest of the world – so far China has stood up to him but others may follow.
Volatile reaction of investment markets
What has been clear in recent weeks is the reaction of investment markets which has been volatile to say the least. At one point recently we had seen the MSCI world index drop by over a fifth with continued volatility across all sectors. There has been some good news with the likes of some Government Bonds and gold (both seen as safe havens in times of trouble) showing pleasing positive returns. In recent years there have been calls for us to be overweight in the American markets and specifically those linked to technology and AI, however we have held true to our principles in keeping your portfolio very well diversified. This stance resulted in some underperformance against the MSCIuntil recently. It has now proved, again, to be correct that the only way to maintain a long term strategy aligned with each individual’s risk strategy is to hold a diversified portfolio and yours is holding up well in these difficult times. The recent volatility has not resulted in substantial portfolio losses and although no-one is comfortable with any form of loss, the strategy of remaining diversified is providing a degree of protection for your invested moneys.
Showing promise
We do not believe the recent turmoil will lead to a major and prolonged downturn, rather that the medium term outlook continues to show promise. You have heard this from me before in similar moments, and I make no apology for repeating myself, but it is again time to hold on and ride out the current troubles.
This article is the opinion of David Wheildon