Donald Trump’s First 100 Days
In the wake of Donald Trump’s November 2024 re-election, investors braced for an aggressive push on tax cuts, tighter trade barriers and sweeping deregulation. Early shockwaves from hefty tariff hikes have already rattled global markets, fueling bouts of volatility and uncertainty. Against this backdrop of policy upheaval, Franklin Templeton’s team of economists has now evaluated the economic fallout of the president’s first 100 days in office.
«From a long-term perspective, we view the escalation of tariffs between the US and China as a continuation of the broader decoupling trend that began during Trump’s first term,» Yi Ping Liao, Portfolio Manager & Senior Research Analyst, Franklin Templeton Emerging Markets Equity, said.
«We see the ongoing trade war as a headwind to the Chinese economy and are cautious on broader Chinese equities. That said, we continue to find high-quality bottom-up investment opportunities due to China’s large domestic market, strong investment in human capital, and scope for monetary and fiscal easing. We see opportunities primarily in domestically oriented Chinese companies, as well as technology leaders in China with limited US exposure,» she added.
Key Risks
«The possible unwinding of US exceptionalism and dollar weakness is a key risk, potentially leading to some shifts in assets from the US to the rest of the world. Asian equities look very compelling in this context, as the region continues to be the engine of global growth. Valuations for Asia ex Japan still look inexpensive compared to the rest of the world. Within EM Asia, we think India is best positioned, as the economic drag from tariffs is limited given India’s large domestic market, and India may also be well-positioned to negotiate a trade deal for lower tariffs,» Liao explained further.
Impact of Immigration and Tariff Policies.
«US recession risks are high due to the impact of immigration and tariff policies. Global growth will slow, depending on tariff negotiations and the length of negotiations. We anticipate that tariffs on Europe and China will detract 1 to 2 percent off these countries’ growth, but these will be offset to some extent by fiscal stimulus,» Carol Lye, Portfolio Manager & Senior Research Analyst, Brandywine Global, a Specialist Investment Manager at Franklin Templeton, said.
«Growth convergence and fiscal trends between the US and the rest of the world will lead to re-allocation out of US assets and a weaker dollar, and we are therefore bearish on the dollar. Within fixed income, we prefer to be neutral G10 duration, but we favour UK gilts vis-à-vis Eurozone bonds. Across emerging markets, we see opportunities in local currency high real-yielding bonds such as Mexico, Brazil, and South Africa. Within Asia, Chinese and Korean bonds provide safe haven protection,» Lye added.
