{"id":500262,"date":"2025-01-21T13:01:08","date_gmt":"2025-01-21T18:01:08","guid":{"rendered":"https:\/\/www.investmentexecutive.com\/?p=500262"},"modified":"2025-01-21T17:32:53","modified_gmt":"2025-01-21T22:32:53","slug":"trump-2-0-strategy-will-increase-market-volatility","status":"publish","type":"post","link":"https:\/\/www.investmentexecutive.com\/soundbites\/economy\/trump-2-0-strategy-will-increase-market-volatility\/","title":{"rendered":"Trump 2.0 strategy will increase market volatility"},"content":{"rendered":"

(Runtime: 5:00. Read the audio transcript<\/u>.)<\/a><\/p>\n

**<\/p>\n

As economic policies around the world diverge, investors must take a geographically diversified approach to investing, Chris Dillon says.<\/p>\n

The investment specialist in the global fixed-income division at T. Rowe Price said the movement toward a \u201cmassive global supply chain, quasi-backed by the U.S.\u201d has stalled, and U.S. president Donald Trump is leading a return to nationalistic economic policies.<\/p>\n

\u201cNeomercantilism is the return of an old vision that links the prosperity of states to their military, industrial, financial or technological power, and uses trade policy specifically as a tool to secure those goals,\u201d he said. \u201cThat’s my one word \u2014 a neomercantilist \u2014 as a description for Donald Trump.\u201d<\/p>\n

Dillon said in a neomercantilist world, monetary policy and economic cycles around the world show more variance.<\/p>\n

\u201cA more deglobalized construct is where we seem to be landing with a second Trump presidency. You\u2019re going to have more divergence,\u201d he said. \u201cThat good old-fashioned 60\/40 construct is going to work here. [But] I\u2019m talking about 60% global equities, 40% global fixed income. A global 60\/40.\u201d<\/p>\n

Under this neomercantilist framework, Dillon said companies involved in national defence and energy could do quite well, as could the technology sector.<\/p>\n

\u201cGenerative [artificial intelligence] and the productivity benefits that may come with this, that\u2019s one way out of the heightened deficit, heavy debt, developed-world malaise that we\u2019ve settled into,\u201d he said. \u201cIf you get a productivity revolution, that can just plow you through times when you’re overstretched as a sovereign nation.\u201d<\/p>\n

The financial sector could also benefit from the deregulation that is expected under Trump, he said.<\/p>\n

\u201cBanks are already rocking and rolling on that news.\u201d<\/p>\n

After a difficult first term in 2016, which led to electoral losses for the Republican Party in the 2018 mid-terms, Dillon said the Trump administration will be focused on a better start this time around, putting its efforts into \u201cone big, beautiful bill\u201d that would tackle tax cuts, energy policy, border security, immigration, spending cuts and debt ceiling in one omnibus package.<\/p>\n

But some view Trump policies as potentially inflationary, resulting in higher interest rates, he said.<\/p>\n

\u201cFed officials are already looking at tariffs and looking at a deficit in the U.S. that is 7% of U.S. GDP, an economy growing at 2.5%, an unemployment rate of 4.3%, and tax cuts on top of that, along with tariffs, and thinking that that is going to be a catalyst that actually takes inflation back up,” he said. “We would not be surprised to see a return to a 5% 10-year U.S. Treasury yield in the very foreseeable future. And a tail scenario that is becoming increasingly plausible from our perspective is a 10-year treasury yield of 6%.\u201d<\/p>\n

Dillon said there are reasons to expect heightened volatility in the near future.<\/p>\n

\u201cYou’re already seeing it in rate markets. You’re going to be seeing it in equity markets. Security selection is going to matter a great deal,\u201d he said. \u201cIn an uncertain world, being diversified matters.”<\/p>\n

**<\/p>\n

This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.<\/p>\n","protected":false},"excerpt":{"rendered":"

Chris Dillon of T. Rowe Price says incoming president\u2019s neomercantilist views will upend trade policy and could spark return to higher interest rates<\/p>\n","protected":false},"author":177802,"featured_media":500265,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[74060,74051],"tags":[57655,2655,82343],"yst_prominent_words":[1695,78565,12409,12141,10788,8909,7391,7387,6837,6732,5159,4745,4737,2142,6],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/500262"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/177802"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=500262"}],"version-history":[{"count":5,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/500262\/revisions"}],"predecessor-version":[{"id":500723,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/500262\/revisions\/500723"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media\/500265"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=500262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=500262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=500262"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=500262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}