Executive Summary
March 2025 marked the onset of a “Trump-led panic” in the U.S., with M-7 stocks leading the declines. Investor sentiment has soured as Trump’s volatile approach to policies clouded market visibility. European markets and India remained resilient despite the negativity. Markets are jittery with recession fears, thanks to Trump’s Liberation Day tariff blitz, which could be a textbook recipe for stagflation. The U.S. dodged recession a couple of years ago due to the resilience of U.S. consumers, productivity gains and technological innovations but could very well be caught out this time around. Only time will tell. Trump’s focus could now shift to the Federal Reserve, with an aim to strong arm the institution to cut interest rates, which would ease the debt servicing burden of the U.S. government. Although the move defies logic, it is hard to bet against Trump’s actions based on the evidence so far in his second term. Gold prices continued to rally, driven by Emerging market Central Bank buying. Despite conventional portfolio theory suggesting a 5% allocation to Gold in a typical portfolio, empirical evidence over the past twenty years suggest an optimal allocation of 20-50% depending on different rolling period returns. The Fed may abandon its promised 50 bps rate cut in 2025 if tariff-driven supply shocks fuel sticky inflation. Markets will need exceptional earnings growth to justify lofty valuations—an unlikely prospect. Tech stocks face scrutiny over massive AI investments, while bond yields may dip as investors flock to safe havens like Treasuries and cash. Gold’s portfolio case strengthens, potentially extending its golden run.
