Weekly Market Pulse: Time Out

A recent analysis suggests that President Trump's tariffs were largely ruled outside the scope of the law used to impose them, and the trade war has so far been mostly 'noise'. European stocks have benefited most from Trump's economic agenda, while the dollar remains in a short-term downtrend and interest rates trade within a three-year range. REITs outperformed other asset classes last week due to falling interest rates.

Analysis

Recent legal developments indicate that a majority of President Trump's tariffs have been ruled outside the scope of the law used for their imposition, a development that aligns with the assessment that the trade war has, to date, largely constituted 'noise' rather than significant, sustained economic disruption. European equities have emerged as notable beneficiaries of the broader economic agenda, with Eurozone stocks appreciating 19.1% since election day and 20.4% since the inauguration. Concurrently, the U.S. dollar maintains a short-term downtrend, while interest rates have remained within a consistent range for nearly three years, with the current yield only 8 basis points above its October 2022 level. In terms of asset class performance, REITs demonstrated strength in the past week, outperforming other assets due to a modest decline in interest rates, underscoring their sensitivity to rate movements.

Key Decisions for Investors

• Investors should monitor ongoing developments in trade policy, as the recent legal ruling against tariffs could temper trade-related market volatility and present opportunities in previously affected sectors.
• Given the significant outperformance of European stocks (Eurozone up 19.1% since election day), a review of European equity allocations may be warranted to assess if the driving factors remain supportive.
• Portfolio construction should consider the persistent short-term downtrend in the U.S. dollar and the relative stability of interest rates, which has recently favored rate-sensitive assets such as REITs.
• It is advisable to maintain a discerning approach to trade-related announcements, focusing on substantive policy changes rather than rhetoric, given the historical assessment of the trade war's impact as limited thus far.