Trump trade war forecast: JPMorgan has published new research outlining its base case scenario for the impact of President Donald Trump’s tariffs on the economy. According to the firm’s global investment strategy team, the effective tariff rate is expected to land in the 10%-to-20% range, significantly higher than the 2% rate at the start of the year.
Tariff Impact on Economy
JPMorgan expects Trump’s tariff blitz to yield “some deals” between the US and its trade partners, but notes that tax rates will still multiply in size. This increase in tariffs is likely to result in an economic-growth slowdown, increased unemployment, and inflation. However, the firm believes that the US will narrowly avoid a full-blown recession.
Investment Strategies
To navigate this new tariff-heavy environment, JPMorgan recommends two main investment strategies for qualifying investors:
Structured Notes
JPMorgan suggests that structured notes can provide defensive exposure to stocks while generating income through options premiums. This strategy can help investors generate income in a volatile environment, although it may come at the expense of some upside potential. Structured notes can be an effective way to manage risk and generate returns in a market characterized by increased volatility.
*Hedge Funds in Diversified Portfolios*
The firm also recommends incorporating hedge funds into diversified portfolios. According to JPMorgan, volatility will create opportunities for hedge funds to “exploit market mispricings and relative value plays across asset classes.” Hedge funds can offer diversification and hedged downside during market declines, making them a potentially attractive option for investors seeking to manage risk.
Still on Trump trade war forecast
Rationale Behind Recommendations
JPMorgan’s recommendations are based on the firm’s expectation of increased volatility in the market. The firm believes that the tariff-heavy environment will create opportunities for hedge funds to generate returns through relative value plays and market mispricings. Similarly, structured notes can provide a way for investors to generate income while managing risk in a volatile market.
Conclusion
In conclusion, JPMorgan’s research highlights the potential impact of Trump’s tariffs on the economy and provides investment strategies for navigating this new environment. By incorporating structured notes and hedge funds into diversified portfolios, investors may be able to manage risk and generate returns in a market characterized by increased volatility.
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