Within equities, relative fiscal and monetary conditions are key factors to consider. Since a tariff is effectively a transfer of wealth from the private sector to the public sector, the US stands to benefit the most since it is the only major country that has enacted fiscal stimulus in earnest. In terms of monetary policy, most global central banks have moved to normalize policy except for Japan, which has not signaled its desire to tighten. In isolation, relative monetary conditions favor Japan, but investors will have to weigh the country’s status as an export-driven economy and whether they will be exempt from future US tariffs.
Nonetheless, there are many more developments still to come in the current global trade saga. For investors, this year is shaping up to be a volatile one and will often require asking the right questions to prepare for when the answers emerge.
This article was written by the team at Sage Advisory, a participant in the ETF Strategist Channel.
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