Following US President Donald Trump’s recent policy U-turns, including a backdown on tariff threats over Greenland, traders have coined the acronym TUNA (Trump Usually Negates Announcements). Fund managers suggest that while geopolitical volatility isn’t prompting a mass exodus from US markets, attractive investment opportunities abroad, combined with concerns about US domestic policy, are steering capital flows elsewhere. Schroders head of multi-assets Australia, Sebastian Mullins, noted that factors such as better valuations, improved economic recovery, and positive shifts in the economic outlook for countries outside the US are primary drivers.
Betashares senior investment strategist Cameron Gleeson echoed this sentiment, suggesting that a solid global growth outlook and a softer US dollar could prompt investors to consider non-US developed markets and emerging market equities, alongside currency hedging for global equities. Antipodes portfolio manager Jacob Mitchell said that markets have been conditioned to assume geopolitical threats will ultimately be de-escalated, the bigger risks emerging out of the US were “regulatory uncertainty and the limits of fiscal activism”. AkademikerPension is a Danish retirement savings management giant. A $US100 million sell-off in US government bonds by AkademikerPension has been interpreted by investors as a symbolic gesture, highlighting shifting sentiments.
Mitchell also raised concerns about increasing bond volatility due to globally high levels of government spending, potentially impacting equities. He noted that “You’re reaching the limits of populism, and that can be very impactful on multiples as well”. Mullins agreed, pointing out that expensive equity valuations could be vulnerable to rising bond yields. He said that, “If you do the calculations, it’s more like 1 per cent of Treasuries outstanding is what the ECB could actually sell, and that could be absorbed in the day. So it’s usually not as bad as it sounds,” he said.
For now, the market appears to be embracing the TUNA trade, with all three US benchmarks closing higher overnight. Investors remain watchful of further policy shifts and their potential impact on global markets.
