March 2025 - Beckett Asset Management

24.03.2025 – ‘Trump Put’

Philip.James@beckettinvest.com24 March 2025

Is the ‘Trump Put’ a Golden Ace for Markets Amid Constitutional Chaos?

Since Trump first took office there has been the theory of the ‘Trump put’, a belief that no matter what happens, Trump cares too much about the stock market to maintain policies that result in significant market falls. This was largely true in his first term and would provide a level of comfort and protection to investors.

Does the theory remain valid? It’s hard to tell?

If you take the president’s word literally, however hard that may be, then you’d conclude that the theory has gone up in flames. When recently questioned about market moves, Trump stated that he’s “not even looking at the stock market”. I’d argue it’s bonkers to believe a money motivated US president and businessman doesn’t care about the value of US businesses. That’s not to say that it’s a priority, but I don’t think this statement was very ‘Truth Social’ of him.

Unclear government policy is very unhelpful for US businesses and is the primary reason we’re seeing significant volatility in markets, particularly for US equities. Someone may argue Trump is using tariffs as a bargaining tool, a view I don’t disagree with, but the key point is that he’s now shown that he’s prepared to impose tariffs seemingly anywhere with little to no prior notice, not just use them in isolation as a bargaining tool. Suppose you’re a manager at a US business budgeting for the future. Tariffs mean that the cost of the goods you import have risen by 25%. You’re going to be incredibly conservative with your future spending compared pre-tariff plans including expenditure on employment, investment in equipment, research and development etc, which doesn’t sound like a plan for growth to me. In addition to this, Donald has poured a little more gas on the fire by delaying but not removing, some but not all of the tariffs – uncertainty on top of uncertainty! Trumpcertainty?

A recent Oxford Economics business survey backs this view up where the majority of respondents stated they’ve become much more pessimistic about the near-term outlook for the economy with the consensus view being that the chance of a global recession has doubled since January.

How do we digest all of this as investors?

The ‘Trump Put’ isn’t something we can rely on and the reality is that a president in their second term has much less to lose compared to their first term, they’re not getting voted in again regardless of their popularity. Trump has seemingly confirmed that this time around he’s prepared to implement policies regardless of economic consequences and how markets react. This sets a downbeat tone for the US market outlook and the ongoing political uncertainty which is one of the primary reasons that the BAM portfolios are maintaining their underweight positioning to the US. Despite this, you don’t need me to tell you that Trump is very capable of changing his mind overnight and therefore, a portfolio that is well diversified across multiple asset classes and regions will help to weather the storm in the US, whilst also capturing the plethora of opportunities that we see elsewhere.

RISK DISCLOSURE: AS IS THE VERY NATURE OF INVESTING, THERE ARE INHERENT RISKS AND THE VALUE OF YOUR INVESTMENT WILL BOTH RISE AND FALL OVER TIME. PLEASE DO NOT ASSUME THAT PAST PERFORMANCE WILL REPEAT ITSELF AND YOU MUST BE COMFORTABLE IN THE KNOWLEDGE THAT YOU MAY RECEIVE LESS THAN YOU ORIGINALLY INVESTED. CHANGES IN RATES OF EXCHANGE MAY HAVE AN ADVERSE EFFECT ON THE VALUE, PRICE OR INCOME OF AN INVESTMENT. THE OPINIONS STATED ARE THOSE OF BECKETT ASSET MANAGEMENT LTD, WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

10.03.2025 – Tariff Tiffs and Economic Shifts

Philip.James@beckettinvest.com24 March 2025

Tariff Tiffs and Economic Shifts

Brash and inflammatory speeches from Tariff Man have meant that China has spent a period of time under the radar and out of the headlines. Despite this, the investment opportunity in China appears to be evolving even if the world’s second largest economy is slowing down.

The key talking point here is sentiment. Fundamentally, nothing has materially changed yet, if anything conditions have deteriorated as some forecasters now believe GDP growth may fall below 3%. But if there’s any country that has a record of finding a way of making things click again it’s the Chinese. As you’d expect, “they’ll make it work” isn’t a strong investment thesis but the words and actions of Xi Jinping and those around him are starting to look more supportive of the economy.

Xi Jinping has been meeting with the country’s most important business leaders. Most notable is that Jack Ma, founder of Alibaba, has been prominent in Chinese state media’s reporting. A monumental change given he went ‘missing’ in 2020 following a speech in which he publicly criticised the financial sector. The Chinese securities regulator is also rumoured to be exploring targeted deregulation to make China a more appealing nation in which to invest, as well as improving the appeal of listing in China. Only last month CATL, the world largest electric vehicle battery manufacturer has filed to list in Hong Kong in what would be the region’s largest stock offering in 4 years.

The rather unimaginatively named “Two Sessions” (week-long annual formal government meetings), are taking place in China this week. The topics for discussion are unknown but it’s very interesting that the “Made In China 2025” project along with the government’s rolling 5 year economic plan both come to their conclusion this year. We have no crystal ball, but supportive policy is very much on the table. For this reason, we have taken our allocation to China from a marginal underweight, to an overweight.

Of course, we need to acknowledge that China isn’t without its own issues. Political risk has long caused headaches for investors in China, with the government being so dynamic and arguably inexperienced, that at times it can be unpredictable.

Unpredictability, recklessness and confusion is high in US politics – one of the best pieces of evidence I can provide you with is a quote by Trump in a recent speech – “Who the hell made these deals [with Canada and Mexico], they’re so bad!”. The last trade deal between the three nations was made in 2018, I’ll leave you to recall who the president was. We have seen a shadow cast over just about anything where there is US influence, whether that be relating to economies, security, immigration, … the list is very long. What’s upset markets the most relates to tariffs. Tariffs are a tax paid by the importer, despite Trump’s persistence that they’ll make other nations pay. Therefore, the tariffs imposed upon Canada and Mexico will increase costs upon US businesses, likely be passed on to the consumer and so ultimately, it’s the everyday person that pays for nonsensical decision making from the very top of government. We believe that Trump is throwing his weight around to get businesses to move their manufacturing to the US, but this is not something that any business can do overnight.

The BAM portfolios have been underweight since before the US election, primarily as we felt valuations were quite punchy. In addition to this, we decided to further reduce our US allocation in February due to the increasing political risk and to fund the above mentioned China purchase where we feel there is a stronger case for improving economic conditions. Despite this, it is important to remain cognisant that just as quickly as we can receive bad news, it’s very possible that Trump may announce a reversal to any of his policies which could spark a market rally.