Albeit time moves fast, and so I hope the new year has started well for you. My theme for this letter is “Buckle-up” because I have been saying for some time now that I am not convinced Trump is all bad for markets, however, I believe it will be a truly volatile ride!
He has certainly come out of the blocks at full speed and we are starting to see the effects of this in markets. The biggest impact, thus far, is on the highest-risk assets, which is to be expected, with a coin on the blockchain losing over 25% recently. This plays to our theme of trying to own the highest quality of assets we can.
Staying with America, the other area in which things are fast changing is in Tech and AI. Recently, China shocked the tech world with the launch of a seemingly competent AI at a tiny fraction of what the American incumbents are spending. This is another area where, whilst we believe in the adage ‘never bet against America’, we still think we are right to have been be cautious of the valuations of some tech businesses.
When thinking about investment, I think that the most telling statistic is that over the past twenty years the US share of Chinese exports has fallen from 50% to 15%. China has developed new trading relationships, particularly with what is now known as the Global South, and our clients with interests in places like India have never been more bullish about its prospects.
Meanwhile, Inflation is broadly stable, so interest rates having been reducing are likewise largely on-hold awaiting to see what happens next.
One area where all portfolios have been challenged is Infrastructure, and so it was encouraging to see a major fund bid for at a nearly 30% premium to its prior share price, which will hopefully help the others in this sector over the near future.
Geopolitics remain a challenge and humanitarian issues look likely to be hit further by Trump’s cost cutting agenda. This aside, we remain broadly positive about markets for the immediate future.
Please may I remind you, nothing in this note represents personal financial advice and should you wish to take any action as a consequence of it, please talk to your authorised GT Wealth Management Financial Adviser first.