TACO investors: Don’t bet too much on Trump-always-chickens-out trade
Investors betting on Trump climbing down may be too optimistic, writes Hargreaves Lansdown’s Susannah Streeter in today’s Notebook
Trump adds more loopdiloops to investment rollercoaster
After the spring rollercoaster ride on financial markets, induced by the trade turmoil unleashed by the Trump administration, there’s been a welcome lull and a further rebound in confidence. The Hargreaves Lansdown investor confidence survey for June shows that confidence in the US market has rebounded 22 per cent, compared to last month. But the fairground ride of tariffs distractions is far from over, particularly now that conflict is raging between Israel and Iran.
As far as trade is concerned, we’ve moved to a bumper car scenario with Trump taking nations on a speedy course of tariff negotiations, before braking abruptly and making about turns, and bringing markets to a standstill in the process. Tariff-induced price rises have, for now, been kept in check, but stagflation is the spectre that could still emerge from the fairground House of Horrors. The world bank is forecasting that the US economy looks set to slow sharply this year, and retailers are flagging they’ll increase prices.
Meanwhile, at the other end of the field, Keir Starmer has been bobbing for trade ducks – hooking deals with the US, India and Europe. It seems to help have restored some optimism about the UK, with the HL survey indicating confidence in economic growth here has lifted by 12 per cent in June.
The TACO trade is roaring, with high expectations that ‘Trump Always Chickens Out’, from his tariff threats. But that’s far from certain and even with 10 per cent baseline tariffs set to be the norm, we may have to buckle up again for a bout of volatility.
Happy Birthday to the Alternative Investment Market!
There will be plenty of disappointed AIM stock investors who’ve focused on renewable energy companies hoping to catch a ride on the coat tails of the push for net zero. Stubborn inflation, high interest rates and geopolitical turbulence haven’t created a clement atmosphere. AIM, the Alternative Investment Market, which offers investors the chance to own a slice of high growth companies, turns 30 this week. Shares may often be more volatile than larger companies and there is a higher risk of companies failing.
Nevertheless, AIM companies represent significant benefit for the UK economy. The latest available research commissioned by the London Stock Exchange estimates that through direct and indirect impact in 2023 AIM quoted firms contributed £68bn to the economy and £5.4bn in tax receipts to government coffers. The reduction in business tax relief in the Budget knocked the market, but there are hopes that government efforts to channel more pension fund allocations into British investments will find its way through to AIM and revitalise stocks.
Norway’s carbon capture progress
As uncertainty reigns in the US about the depth of trade, tax and spending policies, and Trump’s unpredictable decision making dominates headlines, more institutional investors are turning to Europe for opportunity. This could bode well for more unloved sectors in recent years, especially renewable energy. High interest rates have made many projects financially unsustainable. But in corners of Europe, big steps of progress have been made. Norway always appears to be in the fast lane when it comes to the net zero transition and its once more leading the way in terms of carbon capture. This week I’ve been chairing debate at the launch of Longship – the Norwegian government’s full-scale carbon capture and storage project. Part of the Northern Lights network, it will give companies across Europe the opportunity to store their CO2 safely and permanently underground. State support has made all the difference and can be a tide that lifts many ships.
Agent Susa
Meeting my hyper realistic avatar face to face at London Tech Week demonstrated just how quickly AI technology is moving. Following Linkedin owner Reid Hoffman’s example, I took the chance to create my digital double. Agent Susa was created by London-based Yepic AI’s technology, which enabled digital doubles to reply in real time to questions by scanning for visual and audio clue and the conference data set of speeches for reference. Think Abba Voyage but for conferences, although without the high notes or 70s glamour of Agnetha and Anna Frid. I’ll be keeping Agent Susa in my back pocket, only for special event appearances for now.
The Succession parallel
I have only recently begun watching the much-loved epic that is Succession – focused on media, money and feuds. But it is apt timing, given the sparring between the Roy siblings and patriarch Logan is erupting on my TV screen at the same time as hostilities have broken out between Trump and Musk. While the fights haven’t apparently led to fisticuffs on the floor of the Oval office, there’s always time! I don’t know which episode I am more eager to watch.
Susannah Streeter is head of money and markets at Hargreaves Lansdown