It has been a turbulent start to 2025 - since the inauguration of Donald Trump as the 47th President of the USA, it has been like watching a TV Series, where you don't know what is going to happen from episode (day) to episode (day).
The US markets eventually worked out that a. Trump doesn't care about the markets any longer (as we have previously communicated, he considered the markets his key performance indicator in his first term) https://fortune.com/2025/03/25/morgan-stanley-mike-wilson-white-house-stock-market/ b. Trump doesn't care whether there is a recession or not or whether car prices go up because of his tariffs https://www.theguardian.com/us-news/2025/mar/30/trump-car-tariffs and https://edition.cnn.com/2025/03/20/politics/recession-fears-trump-tariffs-biden-obama-bush-what-matters/index.html c. Trumps belief and confidence in Elon Musk is allowing the USA's soft power to reduce significantly, with the return of the ugly American (JFK introduced the soft power initiatives to turnaround the ugly American profile) https://www.theglobeandmail.com/opinion/article-the-return-of-the-ugly-american/ and https://en.wikipedia.org/wiki/The_Ugly_American. If you can’t access the Globe article, listen to this podcast from New York Times https://www.nytimes.com/2025/02/11/podcasts/the-daily/usaid-trump-america.html?unlocked_article_code=1.8U4.a56L.Smv4TX8LjzY1&smid=url-share
It appears that with Trump administration we are seeing a philosophical return to either the 'Gilded Age' where power was held by a few countries or companies.
How does this affect your financial planning, whether you are already retired, about to retire or saving for your retirement?
Probably the most important thing to understand is that this doesn't make any different to your strategy? Your money is going to have to last the rest of your life (so between 5 years if you are well and truly retired, to 30+ years if you are close to retiring to maybe 50+ years if you are still accumulating. As we will have said to you, where possible, make sure that you have enough cash either in your portfolio or in your bank to cover your costs for the next 1 - 2 years. Ideally this would be in your bank, in savings accounts and or term deposits. This way, if you want to you can stop pulling money out of your portfolio and use cash.
Nothing has changed in relation to the principles of investing.
Diversification is still the key - between different kinds of investments and different kinds of fund managers. (This is what we are highlighting by telling you about a different fund manager at your annual review each year).
We select your fund managers for their expertise, and we trust them to watch the world and change your investments.
Over the last two months, since it has become clear that Trump has a different agenda to the one that people thought he was going to have (ie that tariffs aren't just a negotiating ploy), many fund managers have moved investments out of the US into Europe and Asia. (see diagram at the start of this post)
We have the opportunity to have regular briefings from most of our fund managers and we know that some of our biggest fund managers are reducing their US exposure. As an example, Capital New Perspective Fund reduced it's exposure to North America by 1.20% from end of January to end of February, and we know that it is continuing to reduce it's exposure.
You can read more on this topic here https://www.trustnet.com/news/13442659/fund-managers-make-record-shift-out-of-us-stocks
We have done an analysis of our middle portfolio - the Balanced Hybrid portfolio and given all of the diversification in the portfolio, there is only 21% exposure to US companies (we did this a few weeks ago to get an idea, but some of the information is as of December, so we anticipate this is lower now).
There are still good companies in non USA countries that have good outlooks, which is what your fund managers are looking for.
Yes, investment returns have fallen, compared to the Trump Bump that lifted returns a lot from when he was elected on November 4th until the markets came to realise the reality. But because of the diversification in your portfolio, it is highly like likely that you are still in positive territory for the last 12 months.
