US President Donald Trump’s trade wars are dimming the outlook for the global economy, leaving fund managers bracing for an extended period of uncertainty and positioning portfolios for new trade and political dynamics. This is playing out in reduced forecasts for economic growth in the United States and countries already targeted by Trump’s trade policies. Tariffs are seen as likely to raise inflation, complicating the job for central banks that look to lower rates to support economic growth. Back-and-forth headlines are creating uncertainty, spurring caution among investors facing an extremely difficult-to-predict economic outlook.
Some equity fund managers are shifting toward stocks in European and Asian markets, where economies appear better-positioned to weather the trade wars thanks to government fiscal efforts, and where stocks offer more attractive valuations than US names.
Growth Forecasts Hit by Trade War Concerns
Optimism about the health of the US and global economy has taken a hit. Forecasts from the US Federal Reserve now see GDP growth of 1.7% this year, down from a projection of 2.1% in December. Fed Chair Jerome Powell warned that tariffs are muddying the inflation outlook.
When Bank of Canada officials cut interest rates earlier in March, officials warned that “monetary policy cannot offset the impacts of a trade war.” In a speech last week, Bank Governor Tidd Macklem warned that “depending on the extent and duration of tariffs, the economic…
