Sentiment turned on a dime on Thursday as investors piled back into equities. We spoke to one of the country’s top wealth investor shops to find out why.
Sweeping tariffs on hold. Bonds now stable. Equity markets up.
Got it? Good. But what happens in 90 days when the tariffs are supposed to come back in, will the world have moved on?
“I suspect we’ll be very much still talking about this,” LGT Crestone chief investment officer Scott Haslem says.
“I think there’s going to be a lot of negotiations and I think we’re going to be talking about just how the US economy looks.”
That last bit is where it could get very interesting. Economic data already suggests the US economy flatlined in the March quarter and this past week’s madness – from “liberation day’s” tuckshop board of tariffs, to the market’s response and then the backdown – hardly screams “growth mindset”.
Think about it: if you were a big consumer in the US, would you be spending your way through this uncertainty?
If you were overseeing a large industrial company, would you be spending your way through it?
“I would probably not be doing much,” said Haslem, who started his markets career during the 1991 recession, and lived and traded his way through crises and pandemics since.
He thinks the US economy could stall, putting more pressure on president Donald Trump and the White House to get tariffs uncertainty out of the equation.
“I think we’re going to see a lot of negotiations settled between the US and a broad range of countries, and tariffs probably remain at the lower 10 per cent mark.” That’s a glass-half full view of the world. Treasury secretary Scott Bessent earlier said more than 75 countries had come forward to try to negotiate tariffs post Trump’s big move on April 2.
The big question, then, is what happens to China. Haslem’s tipping a “grand deal” – the two countries sorting out a new trade agreement between them – which would be good for certainty and “support markets grinding higher”.
That’s why LGT Crestone, one of Australia’s big private wealth advice shops, was telling clients to buy equities on Thursday.
Haslem made what he terms a “tactical” call to add risk/buy equities; his second tactical call in 10 days. On April 1, he told clients to sell equities and buy bonds ahead of “liberation day”, he said. That’s more tinkering with the asset allocation than usual – he said he would typically make two to three tactical moves like this a year.
What prompted the latest one is fairly obvious – Trump’s tariff backdown. Share markets ripped, including in Australia where the S&P/ASX200 gained nearly 5 per cent. All sectors posted gains.
Haslem said Trump showed that he has constraints and has to be mindful of them – in this case, those constraints include politics, financial markets and the outside world. We earlier argued it was bond markets that forced his hand.
The final piece of the “buy equities” call is the macroeconomic outlook, which improved when the tariffs were suspended.
Unlikely to change is market volatility – that’s obvious, given the many moving pieces and the man and regime at the centre of the United States’ calls. Most of the brokers and wealth managers were saying as much to their clients on Thursday.
Where views will differ is what exactly happens to the US economy and what it means for asset prices.
UBS wealth management chief investment officer Mark Haefele, for example, said there was a 50 per cent chance tariffs would moderate and the Federal Reserve might cut interest rates to support the US economy – that would be the S&P500 at about 5800 points, or 6½ per cent higher than it closed on Thursday morning.
He put a 20 per cent chance on a better outcome (S&P 500 at around 6500 by the end of the year) and a 30 per cent chance of a hard landing, including a resumption of tit-for-tat tariff retaliation and severe US recession.
