Investors Brace for Trade Uncertainty Amidst Shifting Global Outlook

A recent survey by Quilter has revealed that a significant majority of investors anticipate the return of tariffs, highlighting the lingering uncertainty surrounding global trade policies. The survey, which captures sentiment among fund groups, indicates that approximately 80% of respondents believe tariffs will be partially reintroduced. This reflects a concern that despite recent negotiations, the underlying tensions that led to increased tariffs have not been fully resolved. Furthermore, 13% of those surveyed expressed an even more pessimistic outlook, predicting a substantial return to the more aggressive tariff policies seen previously. Only a small minority, 7%, believe tariffs will be entirely removed.

This investor sentiment emerges following a period of fluctuating trade policies. The US, under President Trump, has engaged in trade talks with various countries, including the UK, with whom a trade agreement was inked on May 8th. Additionally, US Treasury Secretary Scott Bessent reported "substantial progress" in negotiations with China, leading to a temporary easing of tariffs for a 90-day period.

However, this 90-day window has done little to assuage investor concerns. As Quilter investment strategist Lindsay James points out, the market remains wary of what will happen "after the 90-day pause on Trump's reciprocal tariffs expires." The core issue, as James highlights, is that "the only certainty is uncertainty, and that in itself is not good for markets." This environment of unpredictability makes it difficult for investors to make long-term decisions and accurately assess risk.

The Quilter survey also reveals a broader pessimism regarding the US economic outlook. A significant portion of respondents, approximately one-third, project that the US will experience real GDP growth of less than 1% in 2025. This figure points towards heightened recessionary risk for the world's largest economy. In contrast, growth forecasts for the UK and Eurozone, while also somewhat subdued, are not as drastically downgraded, indicating a divergence in economic expectations across different regions.

James further explains this divergence in sentiment: "It is not surprising, therefore, to see investor expectations for US equity returns and economic growth to be downgraded. White House policies have been pinpointed by fund groups as the cause for sentiment in the US to swing so dramatically in a negative direction. While many have sought to tread carefully to avoid overt criticism of the recent policies, the investment community is in widespread agreement that the current approach is damaging on many fronts."

In essence, the survey paints a picture of an investment community grappling with substantial uncertainty, primarily driven by concerns over US trade policy and its potential impact on economic growth. Investors are increasingly factoring geopolitical risks into their assessments, leading to a more cautious outlook on US equities and the overall economic trajectory.

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