Market Shock from Trump’s “Freedom Day” Announcement

Trump’s 2nd April “Freedom Day” tariff announcement and the subsequent 90 day pause caused market mayhem and massive volatility. Uncertainty is unprecedented.

Bonds Signal a New Crisis

Share prices have been marked down sharply and ominously the bond market has shattered. This is strange as in times of extreme stress the bond market acts as a breaker fuse and sharply increased demand for safe haven assets such as bonds causes a rise in bond prices. The bond market is the new battlefield and this is a lightning bolt warning to investors. The price action of oil, gold and the Swiss Franc is another heads-up.

Who Is Selling U.S. Bonds?

Very large amounts of U.S. bonds are held by Japan, China and Germany. As bond prices drop, we need to ask, who are the sellers? It would be strange if central banks were behind this as they would be compounding losses on their remaining holdings. It’s more likely that large companies, such as Nippon Life, are the culprits. They have a duty to their stakeholders.

Eroding Confidence in Dollar Assets

Whatever the case, there is a creeping and cancerous perception, that dollar assets are becoming a problem. Certainly, Trump’s policies, are a problem.

Growth-Destructive Policies on the Rise

Suddenly cutting government spending, massive retrenchments, the tariffs, halting immigration and destroying the economics of comparative advantage are all growth destructive. De-regulation and tax cuts will provide tailwinds but only much later.

Inflation, Interest Rates and Stagflation Risk

The biggest problems policy makers now have are that of entrenched and self-fulfilling inflation expectations, a consequent delay in interest rate cuts and the spectre of stagflation. A massive re-set of growth forecasts is underway.

Safe Haven Assets Are Rising

The market does not like this and the market has spoken. The Euro, the Swiss Franc and gold have moved sharply higher.

Portfolio Strategy for Uncertain Times

Cash is king and should be an important pick. As markets forge a new bottom over time choice assets can gradually be added to portfolios. Investors should look for global diversification in high quality duration (i.e. long term) assets.

Strategic Diversification Tips

Investors need to carefully manage foreign exchange positions to generate income outside the U.S. and minimise correlation to the U.S Dollar and U.S. equity markets.

New investments in Gold, the Swiss Franc, Japanese Yen and safe haven European government bonds and Bitcoin may now be more appropriate over the longer term.

Reach Investing Nirvana

When you have simplified your portfolio, added stability and diversification and minimised correlations you will reach investing nirvana.

Now you can start compounding capital!

Extraordinary Profits From Ordinary Shares, Winning Stock Market Strategies

If you are not happy with your portfolio performance or would like a second opinion, please do not hesitate to contact Fenestra for a free, independent, objective and confidential review of your portfolio.

William Meyer – 0796244031