Eroding the benefits of tax reform through America First policies The cumulative, negative effect is
rising but still looks very small • • Market participants have always struggled to net the
impact of President Trump’s growth-enhancing policies (tax cuts, deregulation) and his growth-inhibiting
ones (trade/military conflict, immigration restrictions). 2018 has made the tension most apparent, with
trade sanctions coming only a month after tax reform was approved. • Is the cumulative effect of
numerous America First policies eroding the benefits of tax reform? Not yet. Trade conflict has soared to
its highest level in at least 35 years but remains trivial compared to the size of the economy. The US’s
immigration regime is tightening at its fastest pace since the September 11th attacks, but is far from
reducing potential growth materially. US environmental policy is diverging from trends in many other
large countries, but with no obvious impact on US energy efficiency. National security issues have surged
as a preoccupation but not as a durable driver of market volatility. • If a common theme with
America First policies is that investors should take these measures seriously but not literally, the
strategy implication is to keep asset allocation pro-cyclical but to hedge opportunistically,
particularly when risk premia are low. In early March, this approach meant hedging trade conflict through
currencies. Now, it means fading that stress scenario and focusing on national security issues by owning
oil assets. • Perhaps we are too complacent on the strategic allocation given that the
Administration’s impulsive style carries greater risk of miscalculation when applied to national security
than when deployed on trade, immigration or environmental issues. Hedges will help, but they will not
fully compensate if the Administration must ever be taken literally on America First policies.
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Eine Weiterverwendung und Reproduktion über den persönlichen Gebrauch hinaus ist nicht gestattet.
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