Highlights
Looking at market performance since the start of the year, one might think that not much has happened. In reality, investors are facing major conflicting forces with, on the one hand, a U.S. economy that still seems on the right track and, on the other, a brutally unpredictable Trump administration.
Of the six criteria we established to confirm a soft landing, four have now been met thanks to the slowdown in wage growth, combined with the rebound in manufacturing activity south of the border.
However, we must say that the U.S. President's ability to sow confusion on the trade relations front has broken records since his inauguration, prompting us to publish a short commentary available here.
But one thing's for sure: those hoping for a swift clearing-up are likely to be disappointed. For instance, remember that the last trade war lasted about two years. And even then, Mr. Trump had the audacity to momentarily impose 10% tariffs on Canadian aluminum a month after the new free trade treaty came into effect in August 2020.
This time, the prevailing anxiety about inflation is a limiting factor for the American President, from whom the promise to “cut energy prices in half within 12 months” is looking easier said than done, especially if he entertains hostility with Canada.
For now, we are keeping our asset allocation unchanged, having passed the stress test of recent days relatively well. However, persistent uncertainty increases the risk of negative surprises for global growth in 2025, which could lead us to adjust our strategy over the coming weeks.