How to handle your investments during the Trump turmoil

President Donald Trump’s unpredictability has wreaked havoc on global market stability.

However it is important to remember that markets have weathered many storms and short-term uncertainty has never defined long-term outcomes. 

Most investors ultimately seek asset growth or wealth preservation. While selling during a downturn may feel rational, history shows it often locks in losses – whereas those who stay the course tend to outperform.

If you find yourself in this position, the most sensible approach is to focus on a well-diversified portfolio, emphasising high-quality assets at reasonable prices and ensuring a degree of de-correlation.

This strategy delivers superior “risk-adjusted” returns, mitigating downside risks while capturing much of the upside during volatile periods. 

For investors looking to deploy additional capital, market corrections offer opportunities to acquire high-quality assets at discounted prices, as extreme “risk-off” events often lead to indiscriminate selling and bargain opportunities.

The goal is not to avoid volatility but to manage it with discipline and perspective. Volatility is part and parcel of investing.

Tariffs, too, are not a new phenomenon. They have been a feature of global market cycles for decades and long-term investors who remained patient were invariably rewarded. 

However the abrupt implementation – and frequent reversal – of tariffs under the Trump administration has generated significant upheaval across equity and bond markets. This has weakened investor and business confidence, raising the risk of an economic slowdown.

The swings in both stock prices and bond yields have been extreme, reflecting the heightened uncertainty and shifting risk appetites.

Yet UAE investors can seek solace in a historical perspective: today’s volatility, while uncomfortable, is modest compared to major crises such as the 2008 global financial meltdown or even the Covid-19 pandemic.

Furthermore, Trump’s tariffs are expected to have only a light impact on UAE and Middle Eastern consumers, primarily affecting exports such as aluminium.

After all, beyond hydrocarbons, the UAE is more of an importer than an exporter. It’s also possible that goods such as aluminium may even benefit from waivers because of their strategic importance.

Fed attacks

President Trump’s open criticism of Federal Reserve chairman Jay Powell has further stoked the “risk-on, risk-off” market environment. 

Public attacks on Powell and speculation about his job security raised alarms about central bank independence – a principle considered fundamental to maintaining economic stability. Unsurprisingly, both equity and bond markets responded with fresh declines before Trump tempered his stance, seeking to calm investor fears.

Clearly we are operating in a riskier macroeconomic environment than we were before “Liberation Day” on April 2. However, while the chances of a global recession have inched higher, Trump’s 90-day suspension of reciprocal tariffs has helped markets to stabilise. 

Investor confidence has undoubtedly taken a hit, but corporate profitability remains strong, employment levels are high and inflation – for now – is contained. This is not a typical backdrop for deep economic contraction.

While market volatility is never comfortable, it is a healthy sign that prices are adjusting to new information. Trump’s return to office has certainly brought disruption, but it is also a timely reminder that markets rarely move in straight lines. 

For UAE consumers, inflationary pressures may raise the prices of goods such as electronics, cars, groceries and petrol modestly over time. Still, import duties on US goods are unlikely to change, offering a degree of protection.

Staying the distance

With political and economic conditions shifting so rapidly, asset-specific advice today may not hold true in a year’s time. However a coherent, personal strategy aligned to one’s risk appetite is more critical than ever. 

Focusing on investment fundamentals – avoiding overpayment for assets, diversifying globally and favouring low-debt companies – will always offer an advantage.

With hindsight, a move to asset classes such as gold may have seemed bold, but it is difficult to justify such a move within a well-diversified portfolio over a long period. Fear often fuels rash decisions, but a globally diversified portfolio will always smooth the rough edges of turbulent times. 

It is likely the markets have already absorbed the bulk of shocks and surprises. It is hoped that future developments will be steps toward stabilisation – perhaps  representing Trump’s “climb down the ladder” moment. 

However, UAE consumers are likely to adapt their purchasing behaviour in response to the tariffs. Ultimately customers will gravitate towards where they perceive the best balance of quality and value.

Rupert Connor is partner at Dubai-based Abacus Financial Consultants

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