Trump, Trouble and Tariffs / Solutions
14 April 2025
To all financial friends
This commentary will take a few minutes of your time to read but it is essential to do so. The author of these words suggests it has never been more important to protect, provide and secure your financial future.
Profitable Solutions for Today’s Changing World
Mayhem and upheaval. King Trump sits on his throne inviting world leaders to bow or curtsey begging for the mercy of reducing tariffs. The weakness of this elected President of the most powerful nation is even now showing as his bond market crumbles. Investors are losing trust in the financial strategy adopted and are selling US Treasuries (broadly the equivalent of UK Government Bonds here). The effect was to force this king/president to change his mind with a 90-day delay in applying damaging reciprocal tariffs across the nations of the world.
Power to the Investing People
When investors lose trust in an economy the risk of lending their money feels greater, so investors withdraw funds and the price of bonds fall. To lend again investors demand a higher interest rate to make the risk worthwhile. The USA carries and pays interest on some $37 trillion (yes $trillion!) so the cost of borrowing rises – hence Donald being forced to change his mind.
What Will Happen?
As leaders of the world’s nations come before him negotiations to produce a ‘trump deal’ on tariffs will create a new basis for the worlds’ economy. As this unfolds be very sure opportunities for your money to make money will arise.
How Might the Mighty Fall?
Possibilities: The trade war with China could be crippling to the USA economy and the world. Rebellion of the American public as the price of almost everything will rise and hit their pockets. Retaliation from the world’s nations, applying their own tariffs against the USA. Falling trust and the rising cost of debt cripples the USA’s economy? Trust in King Trump fails, demanding a more democratic style of government. Can it be right that so much control over the world’s economy and its people should rest in the hands of one seemingly unaccountable man?
A Sense of Balance
It is all to easy to get caught up in the drama and the news and lose sight of a well-balanced view. Financial friends hold investments chosen by them across the spectrum. We can see that the bulk of holdings are spread between 11 assets represented by funds held.
Over the last dramatic month gold and silver rose by 10.69%. A great result for our students. Three of the funds held fell by less than 1%.The next four funds fell by less than 4% and the final three, American equities -6.49%, Global Technology -6.94% and UK Equity -9.06%
Contrast this with longer term returns. Over 1 year to date 5 funds made profit (Gold +38.25%, Global Infrastructure +7.31% and Corporate Bond +3.87%) remaining funds created losses.
Over 2 years allowing for last month’s Trump trouble Gold, American Shares and Global Technology each gained more than +30%, The next three funds gained between 10% and 5%. The remaining funds show losses.
Most students achieve diversification between these holdings so achieving less loss and frequently modest gains over the periods shown.
What Could Happen Next?
With the sudden changes of direction erupting in presidential dictates, no one knows (not even Donald), the outcome. We must plan for the best but be prepared for the worst. Whether the best or the worst in global economic terms, there will always be profit to be made in the markets. Whether in war, peace, or during the midst of political turmoil, history shows this is the case.
The Likely Outcome
America, China Europe the UK and even Russia all has to make their economies grow to feed and house and more, their populations. Necessarily, negotiations and agreements will be reached. A trade war that will reset how the global economy works for the future.
Even as I write President Trump has announced that tariffs will not apply to mobiles. laptops and so forth. That will make Apple and other such big names in the sector happy. Technology funds have suffered badly in recent months. Perhaps a sudden rise in value in this sector?
The Trump tempest will fade as agreements are reached. The destruction caused by the tempest will lead to the building and financial infrastructure needed for a new style of global economy.
It is in the reshaping and restoration of what is to come that investment opportunities will abound. Students moving with us looking 2 steps ahead of the market will surely prosper.
The Triumph of the Right Strategy
Financial friends choose and design their own strategy often based on the five strategies that we publish for discussion. Let’s see how these strategies will prove to be beneficial in the changing circumstances.
The Diversification Model
From January to now, so year to date (YTD) such funds have shown losses typically around 3%. The funds hold a broad mix of assets and depend on negative correlation between the assets held to achieve profit and reduce risk by diversification. The uncertainty in the markets now suggest that assets may not perform in the negative correlation way they have in the past.
It may prove that a more specific holding of appropriate assets (although technically increasing risk) might be more beneficial. Historically, diversification in such funds has produced modest returns with some protection from risk in falling markets. In today’s world past performance is no guide to future performance.
The 60/40 Model
This model is the most frequent model used by financial advisers. Research has suggested that in the changing economic climate this model may no longer be safe as a basic standard. The 60 represents 60% of funds always left in equities and the 40 represents 40% in government and corporate bonds. Funds are balanced regularly to maintain this percentage split.
Negative correlation, meaning that when equities rise in value that bonds fall, while if equities fall the bonds act as a form of insurance to rise to lower losses. In recent times this interaction between bonds and equities has failed. Specifically, during the Liz Truss economic chaos and right now, as trust is loss in Trumps USA and investors are selling their bonds there risking a major crisis for the USA economy.
The Profit Takers Strategy
Many happy students are using this strategy, taking advantage of the uncertainty in the markets which are creating short term profits. Having stored these profits in cash students are in the enviable position of being able to buy back into their chosen assets at lower values. As markets recover, they will have increased and leveraged their returns.
Short term profits taken and banked, will help with everyday living costs. This ability can help preserve your lifestyle or build up a store of cash to protect against the ongoing rising cost of living.
Continuing uncertainty makes this strategy worth of consideration.
The Accumulators Strategy
Here, at outset, the investor stored perhaps 80% of their funds in cash at interest while arranging to make regular monthly payments into their chosen investment funds. Market volatility can lead to a higher percentage return than investing a lump sum on one day in time. The strategy is called pound cost averaging.
The balance of 20% may have been invested which in the short term may have caused a small loss or a modest gain. As markets continue their path there will be times when students might choose to pour more money into the markets capturing lower prices and storing up future enhanced profit.
Go For Growth
Here the investor takes the long view. Not concerned by even serious market corrections or market falls, the investor relies on global equities. Currently, and in recent times. global equity funds are likely to have shown a loss but ‘go for growth’ investors trust in long term recovery.
Such investors would be wise to look ahead and move funds to safety some time before they expect to encash. This will avoid a loss caused by a market correction just at the time cash is needed.
The likelihood is that global equities will over the longer term show they are a good holding. However, there are seismic events occurring which may upset the apple cart.
