Enthusiasm has given way to some uncertainty

Macroeconomic update for March 2025

A busy start to the year has seen post-election enthusiasm give way to some uncertainty, driven by concerns over trade policies, tariffs, and inflation. Investors have become increasingly worried about a potential trade war as US President Donald Trump brought up new tariffs on China, Canada, Mexico, and Europe. However, Vontobel’s Multi Asset Boutique sees tariffs as a negotiating tool rather than a permanent shift in policy, with the potential for reversal in exchange for concessions. While rising uncertainty has started to weigh on consumer sentiment, history suggests that tariff-driven price increases tend to be temporary rather than a lasting inflationary force.

Key Takeaways

1. “America First”
   Trump doesn’t have a mandate for trade wars, but for “America First” – which is why we believe the current policy is being used as leverage to secure concessions from trade partners.
   
   
2. Still going strong
   Despite mixed economic data, the US economy has remained robust, backed by a healthy job market and manageable inflationary pressures.
   
   
3. Upgrading emerging-market equities
   We have diversified our equity exposure by upgrading emerging-market stocks to overweight from neutral. In turn, we have downgraded high-yield bonds to underweight from neutral.

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