From MAGA to MEGA?
By Holly Mackay, Founder & CEO
7 Mar, 2025
As global politics canter forward at a breakneck speed, so global stock markets hold up their own mirror to the story, like a financial Snow White. Money doesn’t lie and if you ever want to know the weight of global opinion, look at the stock market, not a poll.
When Trump took office, investors powered US stock markets to new highs, and there was a giddy exuberance about the outlook for US shares and the dollar. Tesla, crypto, AI, YAY! But things haven’t gone entirely to plan. Both the shadow of – and actual – trade tariffs have dampened the outlook for US domestic growth, whilst at the same time, the Europeans’ response to Trump’s foreign policy and associated higher planned defence spend has sent markets higher in the previously unloved European markets.
Why is domestic stuff in America not looking good?
History buffs are pointing to the Smoot-Hawley Tariff Act in 1930 which coincided with the Great Depression. Because no-one sits back and just accepts tariffs – they fight back. In response to the Trump administration’s actions, Canada and China have already announced retaliatory tariffs. KAPOW! And we’re waiting to see if the Mexican tariff taco will be avoided.
Tariffs will make things more expensive to buy for US manufacturers and consumers, shove prices up and create headaches for firms with global operations. Hiring will likely slowdown.
Early cracks are showing in the American seams. Tesla nearly doubled in price between the election and Christmas, but has now nearly given all of those gains up. The S&P 500 is at its lowest levels for about 4 months, and the inauguration fireworks have financially fizzled out.
So here’s the question on investors’ lips for March 2025.
There are signs that US tech stocks might see a sell-down for those redeploying money to either European or Chinese stocks. Will there be a shift from Make America Great Again to Make Europe Great Again (from an investor’s perspective?).
To China first, where another stimulus package was announced on Wednesday. This basically means they plan to borrow more and spend more to cushion the impact of tariffs. Whether they can boost growth is an open question as consumer spending in China remains pretty weak. Consumers are not splashing the cash, but there are hopes for home-grown AI, a boost from subsidies on electric vehicles and growth in smart phones and household appliances.
Closer to home and over in Germany, it’s auf wiedersehen to sluggish markets as an old school story drives growth – defence, construction and banks. Yup, things you can touch, see, shoot and build. And they are borrowing more too. Mein Gott.
"Yes, Holly", you say, "all these lovely stories, but what do I actually DO?" This is where I go really boring money and say the same thing I always do. No-one knows what lies ahead, so all we can do is try to diversify. Have a bit of everything. Spread our bets around. Make sure we're not over-exposed to any one country or sector and avoid the tendency for knee-jerk reactions when markets fall.
A day is a long time in politics at the moment and we might try to react to something which will look very different 24 hours later.
One thing I know will be in for a huge rethink is the sustainable and ethical fund sector. The current question is whether weapons can form part of an ethical portfolio of investments, so that more money can flow to arming countries such as Ukraine. Many large-scale institutions ban their pensions from investing in defence, but was this a “Four legs good, two legs bad argument?”. Should we be able to support countries under attack to defend themselves? Do we apply ethics at the point of production or the point of use? That, my friends, is a bigger question for another day, but back to the mirror that is the stock market.
The market value of BAE Systems – the British weapons maker – has nearly tripled since Russia invaded Ukraine. Rolls Royce has soared. And anything sustainable or ethical is in the doldrums.
On that cheery note, I’ll sign out for the week! Have a lovely weekend everyone. Although the sun is out, the sea temperature hasn’t caught up yet and is currently a balmy 7.2 degrees. There may be sightings of a large white walrus muttering about global stock markets off Southampton this weekend!
Holly
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