July 06, 2018

Donald won the first round

Management comment

Donald Trump has definitively guided and piloted the first half of the year in the markets.

By implementing his protectionist threats, he has triggered an implosion of the global-liberal order and forced all of the US’s trade partners to 1/ firstly acknowledge Uncle Sam’s supremacy and 2/ respond with retaliatory measures. Although the situation has not yet become alarming, it could nonetheless lead to the risk of highly damaging stagflation over the longer term.

Meanwhile, Europe has been affected by a loss of macroeconomic momentum, unlike the US which has accelerated over the second quarter. The performance gap between US and European equities is the painful illustration of this divergence.

Regarding the trade war, China would be hit the hardest and has logically seen its assets, including equities and above all its currency, fall against the dollar and relative to US equities, driven by tech stocks. The yuan experienced one of its worst months since 2015. The current situation is not comparable however as the Chinese authorities have decided to let their currency fluctuate against a basket of currencies.

Global growth continues and Europe has not flagged although the rate of expansion momentarily appears less robust than in January. Protectionism and insularity among western countries constitutes a threat for long-term economic growth. The scientist Isaac Newton, who discovered universal gravity, already warned us by affirming that “we build too many walls and not enough bridges”. Let these wise words not fall like an apple into the oblivion of history.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in July 6th, 2018.

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Donald Trump has definitively guided and piloted the first half of the year in the markets. By implementing his protectionist threats, he has triggered an implosion of the global-liberal order and forced all of the US’s trade partners to 1/ firstly acknowledge Uncle Sam’s supremacy and 2/ respond with retaliatory measures. Although the situation...
2018-07-06