Trump 2.0 – The first 100 days lie behind us

At the end of April, the moment had arrived – Donald Trump’s presidency had passed the first 100 days, and unsurprisingly, Trump celebrated them with self-adulation. Considering that there are still more than 1,350 days of Donald Trump in the Oval Office ahead of us (under the premise of two terms in office), it is hard not to feel a little disillusioned.

Trump is unlikely to tone down his rhetoric, but there are already signs of a certain degree of wear or habituation setting in. For example, the recently announced 100% tariffs on foreign films were largely ignored. The massive rebound in the markets following the tariff shock also shows that market participants have (at least for the time being) ticked this issue off their list and expect a timely agreement. After the longest winning streak in 20 years, the US equity markets are now back to the levels seen before the correction triggered by “Liberation Day”.   

“Mr. Too Late“ leaves interest rates unchanged

In addition to the postponement of the tariffs issue and the progress signalled in negotiations with a wide range of trading partners (even China), investors are also rewarding the perceived stability surrounding the US Federal Reserve. In April, Trump had exerted massive media pressure on Jay Powell, repeatedly calling him a “big loser” and “Mr. Too Late”. The Fed chairman will remain in office and thus stands for a continued independent and stable monetary policy from the US central bank.

This is another reason why, contrary to Trump’s wishes, the key-lending rate remained unchanged for the time being. Powell and the US interest rate policy will be the focus of particular attention in the coming months – the supposedly higher tariffs will drive up prices, and long-term inflation expectations have also risen noticeably recently. In this context, the Fed will be wary of cutting interest rates too sharply. At the same time, it will be important to monitor economic developments closely – a complicated dilemma.

US economy is shrinking

A noticeable slowdown in the US economy seems inevitable. As the chart below shows, the positive growth momentum has already been broken

We should like to point out though that the negative first quarter is primarily attributable to a one-off effect. In anticipation of higher tariffs, US companies have recently increased their imports by a significant degree. Hard economic facts such as the labour market and domestic consumption continue to point to a very robust US economy. The coming months will show how negative the impact of the currently elevated level of uncertainty will actually be.

The results on the corporate side were certainly convincing – more than 75% have reported positive earnings surprises, and the outlook by companies has been generally less negative than expected. The environment remains volatile, but as outgoing stock market legend Warren Buffett said, anyone looking for “risk-free returns is more likely to find return-free risks.”

 

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