Donald Trump’s Autocracy Has Started Its Decline
The madness of Trump’s «Liberation Day» unleashing, a tariff-war of historic proportions, was doubled-down by the US President bragging about foreign leaders «kissing my ass» and eager to negotiate on the imposed tariffs – and yes, many did exactly that. The Chinese didn’t and will not!, says Beat Wittmann in an exclusive interview with finews.asia.
Donald Trump himself, however, was forced into his own «ass kissing» having to kneel to collapsing US capital markets.
«It is my conviction that «Liberation Day» marked the Zenith of Trump’s megalomaniac overreach, triggering economic madness visible to the entire world. It was painfully clear that not a single foreign leader or US advisor was able to stop the president from wreaking unlimited havoc. Only the powerful US capital markets forced him to blink. Where does that leave us?» says Beat Wittmann in an interview with finews.asia.
Trump’s Autocracy in Decline
Amidst all the noise and permanent flooding of news emerge two key takeaways emerge: firstly, US capital markets, including Treasuries, corporate credit spread, equities, and the Dollar are key to watch and analyze as the most reliable indicators for what is to come.
Secondly, Trump’s autocracy has started its decline and along with his political capital to lead and dictate. Trump’s MAGA is a cult, and the MAGA Revolution will eat its own children.
Elon Musk, for example, has already publicly lashed out at the sheer economic incompetence and craziness of Peter Navarro, Trump’s senior counselor for manufacturing and trade.
Signs of Fragmentation
«Nonetheless, Trump’s public announcements should be taken seriously. He will not change his character or ways and will continue to cause enormous damage to the US political, economic, and soft power at home and abroad. He is, however, forced to respect US capital market prices and pay attention to US economic data, US political polls, and signs of fragmentation in the GOP ahead of next year’s mid-term elections,» explains Wittmann.
«I believe that Trump will eventually be the second president in US history to be impeached and enter history books in disgrace far beyond Richard Nixon.»
US-China Great Power Rivalry Reshaping World Order
Geopolitics has become dominant over economics and business. Trump has, in his unilateral and nationalist approach to global affairs, joined the Chinese president Xi.
As a result, the US and China have embarked on a tit-for-tat tariff escalation of a massive and highly damaging scale. The big question now is when and how these rounds of escalation will prepare the ground for de-escalation and ultimately agree on a mutually acceptable trade deal.
More Difficult
«One consequence of Trump’s radical pursuit of reorganizing the global trade system leads to geographic and strategic spheres of influence around the epicenters of power, the US, the EU, and China. This means, particularly for small, successful, and globalized economies such as Singapore and Switzerland that they have to adapt and pivot towards their respective regional superpowers», says Wittmann further.
More difficult it will become economically and financially for many developing nations that benefited from decades of increased trade and are now confronted with an economic slowdown and disruptive protectionism.
Preparing for Investor Capitulation
«I don’t think we have seen the bottom of global equity markets as economic growth, corporate earnings, and business, consumer, and investor confidence continue to take big hits. Take note that capital market cycles mean-revert regarding prices, valuations, and investment exposures between peaks of exuberance and troughs of excessive pessimism,» states Witttmann.
«Let us remember how strong and wrong the positive consensus about US exceptionalism to be turbo-charged by a Trump presidency was at the beginning of this year.»
Fact is, however, that Trump-trades, including equities, bonds, and the Dollar, have been losing ground ever since the president’s inauguration. «Liberation Day», thereafter, accelerated the broad-based and indiscriminate sell-off in financial assets. Imagine, even safe haven and liquid assets, including US Treasuries and gold, were not spared as investors were seeking to deleverage and de-risk portfolios.
Don' Buy The Dips Now
In my view, it is wrong to buy the dips as we haven’t seen decisive signs of capitulation in capital markets. In this context, we would wait until we see some over-leveraged investors in illiquid market niches to go from distress to default and produce negative second-round effects on respective counterparts, leading to broad-based retail investors' capitulation. Hardly anybody, as I know, has heard of LTCM, Archegos or Greensill before they blew up.
«Don’t expect the Federal Reserve (Fed) to mitigate the negative effects of Trump’s tariff crusade by easing monetary policy prematurely and risking its credibility and independence. However, in case of a run on a major financial institution or a large corporate default with contagion effects endangering overall financial system stability, the FED would act decisively,» underlines Wittmann.
Protect Capital and Capture Growth
Expect unpredictable and disruptive geoeconomics from the White House in the months to come, leading to continued turmoil, volatility, and losses in capital markets. He recommends a barbell strategy of defensive investments like cash, government bonds, and gold to protect portfolio value and retain dry powder to invest at a later stage to capture growth opportunities in attractively valued quality equities with a focus on Europe.
The highly fragmentized geopolitical backdrop and the capital market crises push investors to home bias and repatriation of financial assets and investment flows. «The US and USD will be the net losers of this trend, as foreign investors have piled into US financial assets due to their superior performance ever since the 2008 financial crisis,» says Wittmann.
Total Disregard
The rebalancing of foreign investors away from the US into their respective home markets in Asia and Europe, however, still has a long way to go. The unique role of the USD as global reserve currency and the US as a debtor nation, along with its related exorbitant privilege, add to the drama of the situation.
Trump’s «America First» doctrine and total disregard for bilateral and multilateral contracts and obligations, non-stop zig-zagging with policy decisions, and random weaponization of policy tools have broken the trust and damaged the reputation of the US as a reliable counterpart. The dramatic change became evident after Trump’s «Liberation Day» when demand for German Bunds surpassed US Treasuries as a trusted safe-haven financial asset.
Europe’s Epoch of Opportunity
«I firmly recommend foreign investors to stay clear of US financial assets and sell on strength, as Trump will keep pursuing highly arbitrary, entirely unpredictable, and damaging economic policies that are plainly bad for business. And even drastic policy reversals, as just happened with the moratorium on announced tariffs, are disastrous as they breed ever higher uncertainty, poisonous to the real economy and capital market investments,» explains Wittmann.
«My recommendation stands firm – invest in weakness in Europe, as we stated in our 2025 investment outlook. Trump has become the strongest unifying force in Europe, due to his outright hostility, siding with Europe’s far-right nationalist leaders and Russia. Europe has understood the signs of the times. There is no responsible alternative to seeking strategic autonomy in defense, energy, and critical infrastructures and to moving towards a capital market union.»
Positive Shift
In recent meetings with industrialists and investors in Berlin and Munich, a positive shift in outlook became apparent following the German elections and the announcement of designated Chancellor Friedrich Merz to support unprecedented fiscal expansion and adjustment of the debt brake to invest in defense and critical infrastructure. A new and energetic German Government is to be inaugurated after Easter, marking Germany’s political comeback and its role as the European economic motor.
These days, Europe is the only remaining superpower not run by dictators or autocrats but as a democratic and pluralistic system honoring the multilateral order, the separation of powers, and the rule of law.
Investment Favorite
«I continue to expect European markets and the Euro to outperform in 2025 and years beyond. My clear investment favorite remains the European defense-industrial complex as the massive public and private investment programs will have significant multiplier effects leading to higher growth, employment, productivity, and innovation.»
- Upcoming key meetings this summer to watch out for are the NATO meeting in The Hague, June 24th-26th, and the EU Council meeting in Brussels, June 26th-27th.
Beat Wittmann is chairman and partner of Swiss-based financial advisory firm Porta Advisors for ten years now. His more than 30-year career in Swiss banking includes stints at both UBS and Credit Suisse as well as Clariden Leu and Julius Baer.
