Impact of Portfolios During Trump's Initial 6 Months in Presidency: 5 Key Points
Subtitle: Despite headwinds, Q2 earnings register strong performance
Six months into President Donald Trump's second term, his tariff policies are causing a stir in the business world. The impact of these policies is evident in the S&P 500 earnings, with the prospect of earnings growth being put under pressure.
The tariffs, particularly those on imported semiconductors and metals, have created significant challenges for import-dependent sectors such as manufacturing, industrials, and automotive. These high tariffs have led to margin compression, causing concern for many tech companies that rely heavily on imported chips.
However, Q2 2025 saw surprisingly robust earnings performance in the S&P 500. Around 11% profit growth was recorded, with about 80% of companies beating earnings expectations. This strong performance can be partly attributed to operational efficiencies and sector-specific resilience in tech and healthcare, which benefit from pricing power and stable demand.
The initial market reaction to the tariffs during Q2 was volatile, with sharp drops in the S&P 500 following announcements. However, markets recovered strongly afterward, indicating a certain resilience in the face of trade policy uncertainty.
The trade policy environment remains complex and uncertain, contributing to volatility and cautious corporate guidance for the remainder of 2025. Trade war concerns had raised the odds of a U.S. recession to 45% earlier in the year, but these odds have since lowered to 20%.
Europe, on the other hand, is being seen as a geopolitical and economic counterweight to the United States. Coordinated policy support and moderate fiscal expansion focused on infrastructure, innovation, and health care are increasing Europe's credibility.
Looking beyond the United States, international stocks have gone through multiyear periods when they either outperformed or underperformed the U.S. market. For instance, the Vanguard FTSE All-World ex-US ETF has outperformed the Vanguard Total Stock Market ETF, with a return of over 18% compared to 7.4% respectively.
As the Trump administration continues its stop-and-start approach to trade, investors are advised to consider including global stocks in their portfolios. The resilient sectors, such as tech and healthcare, continue to offer opportunities for growth despite the challenging trade environment.
[1] Goldman Sachs analysis indicates that the effective U.S. tariff rate surged to 13% at the end of June from 3% at the beginning of the year.
[2] The Trump administration's tariff and trade policies have contributed to market volatility.
[3] Corporate earnings have been impacted by the uncertainty created by the administration's tariff policy.
[4] The new administration's operations have been unlike any other seen in quite some time.
[5] S&P 500 earnings for the second quarter are expected to show a 5.9% increase in year-over-year EPS.
- The volatile crypto market, which includes ico's and defi projects, mirrors the instability induced by the Trump administration's tariff and trade policies, causing uncertainty for market investors.
- In the midst of general-news headlines about politics and the economy, tech companies are leveraging their resilience and pricing power to boost gains in the decentralized finance (defi) sector, offering potential growth opportunities.
