Aggressive shifts in U.S. economic policy are undermining investors' pro-growth expectations for the new Trump administration, according to Crossmark Global Investments CEO and Chief Investment Officer Bob Doll, who said higher market volatility calls for a more tactical approach than normal until the outlook is clearer.
Doll cited U.S. tariffs on Canada, Mexico and China and said Trump also is "upending several of the foundations that have underpinned the global economic and capital markets backdrop in recent decades, many of which had helped buttress the U.S. exceptionalism theme."
"The U.S. economy has been moving forward over the past three years, fueled by robust consumer spending, a strong job market and bouyant corporate profits, trends that would be expected to continue in the absence of disruptive policies," Doll noted in his weekly commentary issued Monday. Tariffs, however, are "a self-inflicted stagflationary wound, and at least until the unfolding trade war eases, a risk-off climate will persist."
"The U.S. economy is sufficiently resilient to absorb some blows, but U.S. assets are still not priced for a downshift in growth, and valuation is reliant on continued support from foreign investors, which is at risk from the U.S.' increasingly isolationist shift," said Doll, who is best known for his annual 10 Predictions forecasts.
Equity and bond volatility have risen in response to perceived disruptive U.S. policies, Doll noted. As a result, he suggested a more tactical approach than normal until the policy outlook is clearer.
"Given the tariff threat to global growth expectations in the near term, and in conjunction with still-elevated U.S. equity valuations, we continue to recommend a cautious approach to equities," the CEO said.
"We remain cautious about the destabilizing nature of Trump's policy choices coupled with valuation and earnings risk concerns," Doll wrote. "Aggressive U.S. tariffs and broader policy uncertainty will keep stocks under pressure. The U.S. policy outlook is fluid and may require more frequent tactical shifts than normal."
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