After a few days from Trump in power, how do you think it will affect the markets its new mandate?
We are still in the First phase of this transition Towards a new administration in the US. There have not been many details in the first set of measures that Trump approved, precisely the same day of his investiture and in later days, as he said, there have not been many concrete details about what will be the new economic policy of his administration. And in particular, something that worries the markets a lot, which is how the US position will change regarding commercial policy with its main partners.
It is true that in the last days he has already announced what he had already anticipated in the electoral campaign, which is the introduction of a 25% tariffespecially to imports from Mexico and Canada, also the introduction of a 10% tariff especially to imports from China, and in both cases with effects, in principle, since February 1. But the extent to which he has announced it, the fact that he was not part of that first package of measures that signed on the same 20 One of the countries involved to defend, not only what commercial policy is or to protect not only what North American economy and industry is, but also to protect other American or American interests related to these countries. Specifically with Canada and Mexicowhat he pursues with this threat of introduction of tariffs is, fundamentally, an early renegotiation of the trade agreement between the three countries; And also that Mexican and Canadian authorities seriously commit themselves to stop the entry of illegal immigrants in the US through their borders and also the entry of drugs, especially of the fentanyl.
In the case of Chinasomething similar also in what refers to drug entry, but also seeks more general agreementsbeyond the commercial policy itself, in the field of technology, within the scope of geopolitical rebalancing, so to speak. And it is pending what will happen to the European Union. Trump has not specified here the possible magnitude of the tariffs, but he has warned that he will also see them. And in principle I think they will be some selective tariffs about some European productive industries that can become criticism for the old continent. And I am now thinking fundamentally in the automobile sector and also in some agricultural products.
Therefore, as I say, what Trump has done, so far in this sense, is Distribute lettersopen the game and now it remains to see how this game is playing, who ends up taking the cat to the water and who ends up paying the duck. It will be a long process, because it will be a long and complicated negotiation. Possibly there are in some countries or in some moments, moments of tension, but, I insist, I think that Trump’s approach is not the indiscriminate generic introduction of tariffs, as the market feared in recent weeks before the investiture, but rather that It will go to a much more calculated, more prudent, more selective approach. And this is what the market has somehow valued positively and with more peace of mind in these last days.
I insist, we are at first, there is still a lot of cloth to cut, but this is the starting situation. In general, Trump’s economic policy is clearly aimed at strengthening the growth of the US economy; Protect and stimulate the growth of the American industry and, also, protect and stimulate the jobs of native Americans with those mass deportations that are preparing illegal immigrants. The issue is, in this sense, to see how these measures of stimulus to growth, tax declines, industry protection, tariff introduction, even if they are selective, to what extent they can cause a rebound in the inflation rate in the coming months and to what extent they can also limit the, already limited margin of maneuvering of the Federal reserve to continue lowering interest rates in the next quarters. So for the moment we have many weeks still to receive and analyze that information that markets still lack.
What can we expect from the results season?
I believe that every time we are going to see, globally, a less synchronized and more divergent behavior of economic cycles by countries and geographical areas. Clearly standing out and for its strength the US economy and, above all, all sectors of a more cyclical nature and more linked to what is the internal cycle of the US economy and with a clear deterioration that is already evident, but I think it goes to go to more of the European economy.
What I expect in the Results campaign That we have just started, is that, a turning point in the growth of the benefits and income of North American companies, also possibly in some sectors of European companies, favored mainly by the relaxation of the monetary conditions that are They have produced in recent months, by also the containment of inflationary tensions and also, obviously, for a relaxation, especially in the last final stretch of last year, of the Geopolitical tensions. I believe that these trends in recent months will settle and consolidate and continue, at least in the first bars of this year, and that should favor a more dynamic growth of income and business benefits in This last quarter and in the coming quarter. But as I said before, I don’t think it will be a general behavior in all sectors, a General recovery of all sectors or there will be a synchrony in that recovery.
I think the sectors that will best do in this results campaign are las financialclearly, they have also done it quite well in the stock market in recent weeks. The technologyobviously, which is still one of the leading leading sectors. And then everything that has to do with him discretionary consumptionbecause consumption remains, both in the US and in Europe, one of the main growth engines of the economy. In the technology part, the doubt is to see if those results, even if they are good, will be good enough to not disappoint the expectations that market consensus has in the future and, above all, to justify some assessments that are less and less Comfortable, they are increasingly adjusted. But that will not prevent the results from being good. What I say is to see how the market is quoted once they know each other.
On the other hand, the sectors that, a priori, they raise present some Worst perspectives For this results campaign, they are the traditional cyclicals that could, perhaps, have a better relative behavior throughout 2025, fundamentally Industrial, Materials and Energy. These cyclicals, especially the most attached to the American economic cycle, could make it much better than they have done in relative in these last quarters and in recent years. And, in fact, they could be the ones who take over leading the possible rise of the North American Stock Exchange in the event that the technology sector began to lazy in this regard. But well, this is something we will see over the next months and the next quarters.
As for the wallets, how should they prepare them for what is coming this year?
In the line and in coherence with that loss of synchrony and with those growing divergences, both cyclical and financial that we expect globally for the coming months, I believe that we must differentiate well, especially thinking about the proximity between the American market and The European market.
In the case of the European market, I believe that it is more conducive to fixed income, the investment in fixed income than for variable income, unlike what we think of the North American MarketWe believe that the American stock market has better prospects for the coming months than the European Stock Exchange. And therefore, we would ske High Yield and the Investment Gradearound the BBB on average and with a duration slightly below the average of the market in Europe, between approximately three and four.
In the case of American fixed incomewe would be in very small durations of two, that is, very low, well below the average of the market and with a credit risk in this case a little higher. That is, we would be clearly within the High Yield segment that could have benefited, as I said before, of that additional cyclical expansion, of that expansive impulse that we believe will be derived from Trump’s economic policy. Therefore, low quality or relatively low credit quality in the US and low duration; Relatively higher duration and high credit or relatively higher credit quality in the case of fixed income investment policy in Europe.
And in the Variable Income Partwe would have a much more procyclical and growth bias in the case of the US. As I said before, of the technology sector selectively and, above all, also the cyclicals exposed to American internal growth. Possibly also, although this is still to be seen based on the details of Trump’s economic policy, with a Small, more medium capitalization bias. And in the case of Europe we would have a much more value, more sensitive to the evolution of interest rates. For example banks, electric, telecommunications, health sector, fundamentally, and away from cyclicals or at least those cyclicals who cannot compete in an increasingly complex international environment or that are excessively exposed or that are excessively sensitive to internal economic growth of The European economy.
Which sectors can do it better?
In the case of Europa, We are talking about Financial sectorwho is already doing very well in relative, the health sectorthe sector of what we call utilitiesfor example, the part of electric, Telecommunications. Even if we saw that the oil He managed to break up these levels in which he is now, which is in the upper part of his price range of recent months, even the oil companies could have an additional tour of the recovery recorded in recent weeks. And we also believe that there could be an opportunity, after many years of a fairly depressed behavior, in the European real estate sector benefiting from that descent of the interest rates we expect from the European Central Bank for the coming months.
And the real estate? Will it be an opportunity in this 2025 for portfolios?
The real estate sector It could be benefited from this positive sensitivity to the decrease in interest rates already in progress And we believe that it will be intensified over the coming months with an additional decrease objective of the type of reference of the European Central Bank, around a percentage point, to levels of the order of 2%. And therefore, I think there is an opportunity in Europe also within that more value or more sensitive approach to the evolution of interest rates. And one of the funds that could be used in this regard would be the Janus Henderson Horizon Pan European Property Equities Fund.