02.02.26

Spotlight on the United States: Trump Unbound

In this United States-focused article, our Chief Investment Officer, Jeff Brummette, examines the widening gap between political volatility and market behaviour, exploring why financial markets remain resilient despite an extraordinary escalation in geopolitical tension and domestic uncertainty under President Trump. For investors, understanding this disconnect is critical: policy shocks, institutional strain and shifting global alliances all have the potential to alter risk dynamics, capital flows and asset allocation decisions. Jeff sets out the key developments shaping today’s investment landscape and considers what they may mean for markets in the coming months.

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Since the start of President Trump’s second year in office, he has repeatedly tested the boundaries of presidential authority.

He stunned the international community by ordering the capture of Venezuelan President Nicolas Maduro and his wife, bringing them to New York to stand trial on charges related to exporting drugs into the United States. The success of the U.S. military operation, aided by some insiders in Venezuela, revealed new weapons and capabilities and is likely to embolden Trump to pursue further actions (perhaps even against Iran again).

He shocked NATO with his withering criticisms at a speech in Davos, along with his demands to acquire control, if not outright ownership, of Greenland.

He threatened new tariffs on Europe if they didn’t acquiesce, and warned South Korea of additional trade penalties too.

At the same time, a U.S. Navy carrier strike task group is heading for Iran.

Domestically, Trump continues to pressure the Federal Reserve (“Fed”) to lower interest rates. He has publicly chastised Fed Chairman Jerome Powell and directed the Department of Justice to investigate him, alleging he lied to Congress regarding the Fed’s building renovation program.

One might expect financial markets to be in turmoil, yet the opposite is true. U.S. equities are once again flirting with all-time highs. Most international markets are rising as well and bond markets remain relatively calm despite large fiscal deficits across the developed world.

That said, gold, silver and the U.S. dollar are showing some signs of risk aversion. Gold and silver continue to reach new highs, while the dollar has weakened after remaining stable for most of the second half of last year. Trump has even suggested that he is comfortable with the dollar’s recent decline. Although this does not necessarily signal a broad “sell America” move on the part of investors, it may be early signs of foreigners hedging their U.S. holdings and perhaps buying fewer U.S. assets.

Trumps biggest issues are domestic. The affordability issue, which he still labels as a democratic hoax, has forced him to go on the road touting his economic success. Yet emphasising stock market gains and GDP growth does little to resonate with voters, who see no relief in their day-to-day cost of living, which soared after the pandemic ended. His poll ratings are suffering, and he is acutely aware that if the Democrats regain control of the House of Representatives in the mid-term elections this November, they will make his life very difficult.

 

Polling Average of Donald Trump’s Net Approval Rating

Source: Silver Bulletin

 

Perhaps Trump’s biggest problem has emerged from what he regards as one of his greatest achievements. The U.S. southern border is now effectively closed, with virtually no illegal immigration taking place. Yet his aggressive deportation strategy has backfired: incidents of violent behaviour by Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) personnel have culminated in the shooting of two American citizens in Minneapolis over the past month. Both shootings were captured on video by bystanders, and those recordings contradict the administration’s public statements.

The resulting public outcry has blindsided the administration and now dominates the 24-hour news cycle. Trump’s attempts to spotlight his economic successes are falling flat. He is scrambling to defuse tensions and no doubt some heads will roll. However, unless there is a complete change in the tactics of these agencies, and the agenda to deport as many undocumented immigrants as possible, including those with no criminal record, is re-evaluated, then Trump’s and the Republicans’ approval ratings will continue to suffer.

President Trump is posited to remain a source of instability and volatility in the months to come.

 

The price and value of investments and any income that might accrue may fall as well as rise and is not guaranteed. You may not get back the amount of your original investment.

 

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Hear more from the Oakglen experts

Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which some of the investment management team have recently covered:

 

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    Jeff Brummette
    Chief Investment Officer
    +44 (0) 20 4583 1129

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