Element Investment Managers: 2025 market outlook

The first 100 days of President Trump's second term have been turbulent, marked by volatility in the markets. While the US GDP saw a decline at the start of his tenure, job numbers and prices have remained relatively stable. However, investors are growing increasingly concerned about the economic outlook as they try to navigate through Trump's presidency. In a recent interview with CNBC Africa, Keith McLachlan, CEO of Element Investment Managers, provided valuable insights into the key questions facing the market as it grapples with uncertainty. McLachlan highlighted the significance of Trump's consistent stance on tariffs as a major concern for the economy. Drawing parallels with the high tariffs of the 1930s during the Great Depression, he emphasized the serious implications of such measures on global growth, particularly for the American economy. Despite the differences between the current trade landscape and that of the 1930s, McLachlan stressed the need for caution and defensive positioning in the market. As the market braces for potential volatility ahead, McLachlan advised investors to focus on quality companies with strong balance sheets, profit margins, and management. He recommended leaning into sectors like healthcare, consumer non-discretionary, and value entertainment, which historically have shown resilience during tough economic times. Additionally, geographic diversification and a balanced portfolio approach were deemed essential to weather the uncertainties. When asked about the balance between US and emerging markets exposure, McLachlan highlighted the importance of having some exposure to the American market despite remaining cautious. He mentioned a slightly increased focus on China and emphasized the strategic value of assets like gold in a volatile market environment. McLachlan's approach reflected a nuanced strategy that aimed to capitalize on diverse market opportunities. Regarding Europe, McLachlan expressed a bullish sentiment towards European defense stocks but acknowledged the challenges and risks associated with the region. He noted the multi-year cycle in the defense sector and emphasized the need for a diversified portfolio to navigate market fluctuations. In light of ongoing trade negotiations between the US, China, and Europe, McLachlan underscored the critical importance of monitoring US Treasury prices as a key indicator of market sentiment. Highlighting the interconnected trade dynamics between the US and China, he warned of potential repercussions if China decides to liquidate its substantial holdings of American Treasuries. In conclusion, McLachlan's prudent advice to investors revolved around quality, diversification, and vigilance in monitoring key market indicators. As the market continues to navigate through uncertain times, staying informed and maintaining a disciplined investment approach will be essential for preserving capital and seizing opportunities in a volatile environment.