Hard to bet against: An erratic Trump no dampener on US asset boon this year

While Trump’s return to the Oval Office has been nothing short of a fever spell, US financial markets remain well placed and, moreover, on track to deliver strong returns for investors this year, says a leading market analyst.

For Chris Iggo, AXA IM chief investment officer (CIO), the US’s macroeconomic backdrop “remains solid”, despite the ongoing threat of trade tariffs and heightened geopolitical tensions.

“The world’s largest economy is growing, US consumers continue to benefit from a healthy jobs market, growing real wages, and a substantial wealth effect,” Chris Iggo, Chief Investment Officer, Core Investments, AXA Investment Managers

“Markets are doing well too. Nothing that the new US president has said or done has caused a bad reaction in financial markets. Quite the contrary, despite the uncertainty, equities are up, and so are bonds.”

As Iggo notes, US equity ETF investors, in particular, have reaped solid gains over the last 12 months, with the S&P 500 index hitting an all-time high on 19 February (reaching 6,144 points).

“Notably between Joe Biden’s inauguration in 2021 and Trump’s in January, the blue-chip index achieved a total return of 63.3% (13% annualised),” Iggo said.

Trump, ever the competitor, will “no doubt… be determined to beat that,” he added.

The index, nevertheless, has borne market jitters over the last week, down 4.8% from its highwater mark (hitting 5,850 points at market close on 3 March) and 0.54% down in the year-to-date.

Trump’s favourable views on AI and tech, the oil and gas sector and the deregulation in finance remain “the centre of hope for continued stock market performance”, Iggo said.

Bond markets, as Iggo noted, are also well positioned for growth, with the decade of low interest rates likely “well behind us”.

“Bond market moves are driven by growth, inflation, policy, and geopolitical events. And recent events have hit bond markets as yields have risen on the back of the Federal Reserve’s interest rate easing, with 100 basis points in cuts since September.”

For Iggo, higher yields present compelling opportunities for ETF investors to increase their uptake of bonds this year.

“US Treasuries have always had a role as a core allocation thanks to their stability, liquidity and a diversifier and currently ETF investors should also potentially benefit from long-term yields of between 4% and 5%.”

“This raises the probability of potentially decent returns for ETF investors across the asset class in 2025,” Iggo said, while the three-year default rate for high yield bonds is at a three-year low of 1.5%, “[exemplifying] the strong fundamental and technical backdrop of this asset class”.

“For all the market commentary around bond markets, liquidity is good, demand is strong and losing money through default is still a very rare event.”

Just over a month since Trump took office, and despite the uncertainty and potential upheaval his future policies may bring, the current strength of the ETF investment environment is likely to persist, according to Iggo.

“[For] ETF investors markets – tech sector lurch aside – have been relatively calm while the outlook for company earnings, markets – and potential investment returns – remain bright.”

“Ultimately, despite the current uncertainties, it remains hard to bet against the US.”