After all, we could expect twists and turns and this overbearing attitude from Donald Trump, as was already the case during his first term. But the scale of these reversals--whose impact is global--is beyond comprehension. Moreover, this has begun to weigh seriously on the morale and confidence of households, businesses and investors, all of whom abhor uncertainty.

But rather than talking about the short term and tariffs--everything and its opposite has already been said, which is rather normal when you think of all these twists and turns--perhaps we should look a little further ahead. As an asset manager, especially in times of high uncertainty, it’s a good idea to focus on our clients’ long-term return and risk objectives. Indeed, the idea is not to make a value judgement on US politics, but to try to anticipate what the next political decisions will be, how far they will come and how they might impact markets and portfolios.

Debt-ridden

The poor performance of US assets in the first quarter of 2025 can be partly explained by the sequencing of policy announcements and, Unlike his first term, Donald Trump started with the bad ones, i.e., the increase in tariffs. Despite yet another turnaround, US tariffs are at levels not seen in a century. The idea, according to the Trump administration, is to collect billions of dollars in order to finance fiscal stimulus measures.

It may be said that, against a backdrop of soaring US debt, this would enable Donald Trump to avoid experiencing what former British prime minister Liz Truss experienced during the mini budget crisis in September 2022. Financing fiscal stimulus measures entirely by issuing new debt at high interest rates could have sent the bond market into a panic. Perhaps this is why Donald Trump changed his mind by reducing the tariffs he had announced a week earlier, with the exception of China, Canada and Mexico, as the US bond market began to show signs of feverishness.

Donald Trump on the stimulus

This suggests that the Trump administration may now be focusing on those famous fiscal stimulus measures. The House of Representatives of the US Congress has already approved Donald Trump’s budget plan, which includes not only spending cuts but also tax cuts. From a macroeconomic point of view, these cuts would support growth and cushion the stagflationary shock (slowing growth and rising inflation) from the overall increase in tariffs. Deregulation could also help to support growth by simplifying administrative procedures.

However, the markets remain nervous, particularly in the United States. The country is at the epicentre of the shockwave, and investors are questioning the reserve currency status of the US dollar and the safe-haven status of US treasuries. As for equities, growth risks continue to weigh on stocks.

Neutral portfolios

For the moment, we think the risks are symmetrical. Trade talks and fiscal stimulus could ease markets. But tensions are at their highest (as we have just seen with the new escalation between the US and China) and negotiations could be difficult, take time and continue to fuel fear in the markets. Given these risks, we no longer have a short-term tactical bias. We have therefore brought the portfolios back to neutral, i.e., in line with our long-term strategic allocation.

As always, as markets react quickly to news, we try to avoid knee-jerk reactions and keep our cool. We anticipate potential developments and align portfolios with clients’ long-term objectives, taking into account risk and return considerations. We also stand ready to make the necessary adjustments if economic and market conditions deviate significantly from our baseline forecasts.

Nicolas Sopel is head of macro research & chief strategist Luxembourg at Quintet Private Bank.

This article was originally published in .