Bob Homan: The boy who cried wolf

Bob Homan: The boy who cried wolf

February 11, 2025

Equity United States Politics Trade conflict Geopolitics
Bob Homan (Cor Salverius Fotografie) 980x600

This column was originally written in Dutch. This is an English translation.

By Bob Homan, Head of ING Investment Office

We still have few tactical bets open after neutralizing our overweight in US equities. Just to be on the safe side, in case Donald Trump does come through with a threat.

If you had made a movie recently about an American president making statements like the actual president is making now, the movie would probably have been classified as slapstick. Meanwhile, it is daily reality. And the reactions? They are diverse. Some see his remarks as threats, others don't take it all that seriously.

Higher import tariffs seem to be the biggest risk for the stock market. After all, higher tariffs lead to higher inflation and lower economic growth - not a great cocktail for stocks. However, tariffs announced with much fanfare for Canada and Mexico were delayed just a day later. At the initial announcement, stock markets fell, as you might expect. At the postponement (is postponement?) stock price recovery followed. Personally, I think the reaction at the next announcement could be even more tepid. More and more market participants are in the camp of those who do not take it all so seriously.

In my view, this will also apply to those receiving the threats. If they find that there are quick deals to be had with Trump, they will be less inclined to hold water. This is where the greatest danger lies. To remain credible, one time a threat will have to be carried out. Probably at the moment when no one is counting on it anymore. Then the question arises: how do you deal with this as an investor? Do you go out of shares because there is a chance things will go wrong?

I don't think so. Getting out rarely turns out to be a good strategy. Maybe the blow won't come until prices are already much higher. So when do you get back in? The strategy we choose is to take some risk off the table. For example, we neutralized our overweight in equities and also our overweight in the U.S. versus Europe. With that, we still have few tactical bets open. That will come later. Perhaps like the boy in the well-known fable who cried wolf for the umpteenth time, and all of a sudden the wolf was actually there.

 

 

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