A strategist is warning of a divergence in the US and European markets due to Trump’s trade policies, suggesting investors consider bonds, Europe stocks, and bitcoin. According to Dhaval Joshi, chief strategist for BCA Research’s Counterpoint, the US faces stagflation, while other major economies face deflationary pressure.
Trump’s tariffs on China have created a divergence in central-bank responses, with the Federal Reserve conflicted between addressing US growth concerns and persistent inflation. This limits its ability to cut rates aggressively, which won’t help Treasurys. In contrast, central banks in Europe and elsewhere can respond more decisively, enabling lower interest rates.
Joshi predicts that U.S. T-bonds will suffer from higher inflation rates and loss of privileged haven status, similar to the U.K.’s government bonds after Brexit. He suggests investors overweight gilts and European equities, which present a compelling value proposition due to their deflation of the artificial-intelligence bubble.
The strategist also notes that foreigners are shedding US bonds and stocks, creating pressure on the dollar, and thinks bitcoin may be the currency to gain most from the greenback’s decline. He sets his price target for bitcoin at $200,000+.
Investors should consider these factors as they navigate the current market environment. With ongoing trade tensions and shifting central-bank responses, it’s essential to stay informed and adapt to changing market conditions.
Source: https://www.marketwatch.com/story/trumps-tariffs-are-americas-brexit-says-this-strategist-these-are-the-trades-to-make-9947ee62