Trump, Trouble and Strategies
14 March 2025
To all financial friends
Over the last 12 months to date (12.03.25) the main 11 holdings held by students show that 7 investments/assets out of 11 held, are showing profit. This despite the recent market turmoil. The top three holdings gaining: Gold +54.21% American Equities +10.54% Global Infrastructure +9.14%. Global Technology and Index Linked Gilts have fallen by -4.29% and-7.56% respectively across the last 12 months.
Technology
Over the past month to date Global Technology fell by 14.19% . Technology represents a strong element of the US market Nasdaq Composite Index as well as the S & P 500 index. While the outcome of Trumps tariffs on the American economy is uncertain this is troubling the technology sector, DeepSeek in China is a greater potential worry.
DeepSeek is an emerging Chinese artificial intelligence (AI) company in competition with the traditional method of developing AI. Huge investment made in traditional AI development is now feared to be under threat. We do not know yet how valid this threat is but it causes great uncertainty in the technology sector. The ripples of these concerns have knock on effects to the American and global markets.
Inflation
Prior to the Trump eruptions the main trigger for markets appeared to be the outlook for interest rates and inflation. Few would doubt that the battle against inflation is far from won. Looking two steps ahead of the market should bear this underlying factor in mind.
Trump, tariffs and turmoil was the heading of my last commentary a few days ago. Now we turn to the opportunities, the markets and our strategies are showing as a result of the turmoil.
While students design their own portfolio many adopt one or more of the five strategies we have discussed in the past. Please see these strategies outlined in the attached document.
Please refer to each of the strategies in the attachment for a reminder of how each works to link to the comments for the outlook given below.
The Diversification Model
With your investment spread over some 12 to even perhaps 15 different funds/assets the model will depend on negative correlation. Where there is a lack of specific holdings reflecting the current economic, geopolitical, political and upheaval in the markets some concern might be felt for the future. Assets do not necessarily behave as past history may suggest.
The 60/40 Model
With a fixed pattern of 60% of funds held in equities and 40% in bonds (corporate and government) there is no, or little, recognition of the current economic background. This model is the traditional strategy used (and still used) by many advisers across the board. The model has worked well in past years but prior to the very recent events, the validity of this model has been questioned. Today the risk of such a set model must be questioned. In terms of commentary the future is concerning unless markets return to normal patterns.
Profit Takers Model
Students who have been profit takers are now seeing the advantage they have opened-up. The volatility of the markets and various assets, in the past three years, has given surprisingly high and frequent short-term profit making and taking opportunities. Students with profits taken and stored in cash are ready to re-invest as prices fall. Some may commit lump sums at lower prices. Others may choose to drip feed their stored cash on a monthly basis into equities or other assets. In effect re-investment in this way leverages returns for the future, seeking to maximise longer term benefits. Pretty clearly, volatility will continue making this strategy of ongoing interest.
The Accumulators Model
Students using this defensive model must be very happy that their pile of cash has protected them from the current short-term fall in the value of some asset types in the Trump turmoil. The small percentage of funds and the sums invested monthly may indeed have fallen in the short term. However, monthly investments will now be buying at lower prices awaiting the recovery of the market when prices will deliver a leveraged return. Consider the opportunity of investing more than the monthly allocation as cash held will not enjoy the great benefit of compound interest. A foot in both camps, cash and equities or other assets, may feel comforting as things develop.
The Go for Growth Model
Students in this category will not be troubled by short-term market upsets. Remaining in global equities for the long-term, riding the highs and lows of market performance is acceptable for the hoped for long-term gain. Past performance is no guide as to the future performance. Always look ahead to a point where you may wish to draw funds. Take action to lessen risk as the day for withdrawal approaches.
