Fast Abstract:
This put up accommodates extra random musings in regards to the present state of affairs, plus an up to date “portfolio verify” on the finish. So be happy to leap to the top in case you are solely within the portfolio verify.
Background:
On the finish of 2024, I wrote a primary put up about what may occur following each a Donald Trump win within the US election and a breakup of the German coalition. My takeaway was that possibly US shares weren’t the good deal they had been speculated to be.
Since then, two main developments have modified:
- The promised 7–10% US development has changed into an virtually sure recession.
- The end result of the German election has been barely higher than initially feared.
All of this has led to a major outperformance of European large-cap shares, particularly in Q1.
Trump / US
I’ve completely no concept the place that is all headed. However one factor is for certain: uncertainty. Particularly relating to the longer term path of the US authorities, uncertainty has elevated considerably.
I feel this interpretation by CNN anchor Fareed Zakaria summarizes the “new world” fairly realistically:
📺 https://www.youtube.com/watch?v=3xz7BGAJYhg
A extremely advanced tariff system for the world’s largest financial system—the place exceptions might be granted or revoked by a single particular person—will undoubtedly create important collateral harm, even when just a few gamers handle to learn.
Whereas it’s laborious to match instantly, Trump II appears simply as chaotic as Trump I. However there’s one key distinction: the individuals round Trump now appear way more ideologically pushed than throughout his first presidency. Watching them on TV, it more and more resembles a cult—very like the cult round Elon Musk, solely with a lot deeper penalties.
The overarching ideology appears to be that America has been taken benefit of by your complete world, and now it’s payback time—via tariffs, land grabs (Greenland, Panama), or compensation for army help (Ukraine’s uncommon earths).
They might give attention to China, however they don’t appear to care if the remainder of the world goes up in flames.
The Position of Traders within the US Commerce Imbalance: Free Money Circulation and Capital Effectivity
From Trump’s standpoint, the narrative is usually that China, Europe, and even “the Penguins” have stolen manufacturing jobs via unfair practices—primarily by providing cheaper labor.
However one angle is usually forgotten: investor strain on corporations to remain “capital mild” and generate important free money stream.
If you discuss to buyers about European shares, one argument at all times comes up: “Look how weak free money stream is on your European corporations, and the way poor their returns on capital are. US corporations, alternatively, are money machines with huge buybacks.”
Warren Buffett himself defined this intimately in his 1985 letter to shareholders, when he shut down his textile enterprise. Right here’s the important quote:
“Thus, we confronted a depressing selection: enormous capital funding would have helped to maintain our textile enterprise alive, however would have left us with horrible returns on ever-growing quantities of capital.“
Buffett—and plenty of capital allocators after him—acknowledged a tough reality: mass manufacturing is capital-intensive, cyclical, and aggressive. And that mixture simply doesn’t produce nice shareholder returns in the long term.
It’s far simpler to create free money stream from providers (GEICO), sugarwater & caffeine (Coca-Cola), or branded sweet (See’s Candies).
For my part, the relentless US give attention to capital effectivity and the outsourcing of capital-intensive, aggressive manufacturing is a key driver behind the unparalleled efficiency of US shares during the last 40 years. The sooner you ditched manufacturing, the sooner you bought wealthy—or super-duper wealthy—as an investor, PE man, or company CEO.
Sure, just a few nice US manufacturing corporations stay, however most are area of interest gamers with high-margin merchandise.
In distinction, in most main exporting international locations—Japan, South Korea, Germany, and even China—returns on capital are considerably decrease. Why? For Germany not less than, a part of the reply is likely to be that many corporations had been family-owned, with homeowners much less desperate to get wealthy quick and extra content material with getting wealthy slowly—or simply staying wealthy.
It’s no coincidence that Apple or Nvidia—who don’t truly manufacture themselves—have far increased returns on capital and free money stream than Samsung or TSMC, who nonetheless do a whole lot of their very own manufacturing.
This is among the major the explanation why US markets have massively outperformed everybody else for many years.
The Massive Query
Who will present the capital—and settle for the low and risky returns—to convey manufacturing again to the US?
Perhaps some Chinese language corporations can be prepared to construct factories within the US for low returns, however the Individuals doubtless received’t permit it.
European companies won’t have the capital—particularly if a recession is triggered by US tariffs. The identical might go for non-Chinese language Asian corporations.
Even absolutely automated factories are capital-intensive and much much less environment friendly than outsourcing to a companion who’s happy with a decrease return on capital.
This is only one flaw within the “tariffs will convey again jobs” technique—however I haven’t seen a lot dialogue round it.
Germany / Europe
All in all, the result of the German election—not less than from an financial perspective—could also be fairly near a “best-case” state of affairs, no matter which means.
A CDU/CSU and SPD coalition is more likely to ship a extra pro-business, pro-growth agenda than a authorities that features the Greens or extra radical events.
The unhealthy information is that about 35% of voters nonetheless supported radical events (AfD, Die Linke, BSW).
They now have 4 years to indicate whether or not they can stabilize Germany and Europe. If not, there’s a excessive probability these events will enter authorities subsequent time.
What they’ve executed to date appears… okay. Not nice, however okay.
On the EU stage, the response has to date been measured and cheap. Nonetheless, the Trump administration clearly harbors deep resentment towards Europe. Assuming a “no tariffs” consequence can be naive.
I see actual potential for escalation—possibly not fairly as unhealthy as with China, however Trump’s affection for Putin ought to make Europe cautious of anticipating truthful remedy. What we will simply see from the Japanese and UK “negotiations”, an this Buffett quote involves my thoughts: “It’s not possible to make take care of unhealthy individuals”.
Thus far in 2025, European—and significantly German—shares have considerably “decoupled” from the US. However I don’t imagine this can be sustainable.
“There Will Be Blood”
It doesn’t matter what occurs within the subsequent weeks or months, for my part, a whole lot of harm has already been executed.
The tariffs proposed by Trump are so excessive that no critical businessperson can confidently allocate capital with out understanding the place issues are headed. And because it stands, there received’t be readability anytime quickly.
In case you spend money on the US, who’s to say these tariffs received’t disappear in 3 months? You may as soon as once more end up competing with low-cost imports.
The one query is: who will get hit hardest?
Proper now, it appears massive corporations with sturdy lobbying (Apple) and highly effective curiosity teams (US farmers) is likely to be spared or compensated.
However many smaller companies—each within the US and overseas—will endure.
After all, there can be winners, too. Smuggling—or “optimizing provide chains”—might develop into vastly worthwhile once more. Subtle logistics companies that may reroute and repackage items will do properly.
Native gamers who profit from diminished overseas competitors will even revenue. Something that guarantees “independence from China” will doubtless do properly within the brief time period.
However once more—this might be short-lived.
Consensus Trades & Structural Winners
The present consensus trades are:
- Gold (inflation hedge)
- European protection
- Uncommon earth mining
We’ll doubtless see extra of those “winners” rising—however to learn, you’ll want to remain nimble and act quick when the tide turns.
Some sectors may benefit structurally, as an illustration:
- Infrastructure with inflation-linked pricing energy (changing it could be pricey)
- Round financial system gamers—recycling important uncooked supplies might develop into a key benefit if commerce wars intensify.
“Protection First” – Up to date Portfolio Test
I’ve stored the outdated replace from final 12 months and made modifications the place wanted, together with new positions
| STEF | No direct publicity, each to US and German coverage modifications for my part. New: decrease oil/power costs and rates of interest constructive, no direct affect of tariffs |
| TFF | Barely detrimental publicity to European wine exports to the US, barely constructive publicity to decrease taxes for the (rising) US operation. Total impartial.TFF is possibly probably the most difficult case. US Bourbon exports can be clearly negatively impacted, in addition to European Wine exports to the US. Nonetheless, native consumption of US Bourbon within the US may enhance (much less competitors) and the connection between Europe and China may enhance. Total, nonetheless detrimental affect, additionally extra friction than up to now for TFFs major prospects on high of behavioural modifications (much less alcohol consumption total). |
| DCC | No exports.Probably some detrimental affect on “clear power” initiatives, alternatively 20% of OP realized within the US, conventional power enterprise may need an extended runway. Barely constructive. Whereas I’ve been penning this. DCC introduced to give attention to power, to which the share value reacted positively.The enterprise as such will almost certainly however not affected. Nonetheless, the present divestment plan of the non-Power actions can be clearly hit by decrease comparables and diminished deal exercise. So in the meanwhile, detrimental affect.l |
| SFS | SFS principally produces domestically. Nonetheless, through the acquired Hoffmann Group they’ve publicity to most of Europe’s exporters from the machining trade. On the flipside, Chinese language opponents to SFS’s prospects may endure much more. Nonetheless, total barely detrimental, not less than within the brief to mid time period.Not a lot change right here, with the one exception that SFS for my part has first rate publicity to the European steel working trade, which could profit from elevated protection spending. I’m shocked how a lot the share value went down. |
| ATD | ATD has a whole lot of enterprise within the US, so decrease taxes must be good. Larger rates of interest for the Japanese Acquisition (if it goes via) can be detrimental. Total barely constructive.A US recession would clearly be not nice, however nonetheless it is a very resilient enterprise for my part. |
| Italmobiliare | No related publicity aside from some US based mostly PE funds. Total impartial.No huge modifications right here i suppose. |
| Eurokai | A really fascinating query. If international buying and selling quantity would decline considerably, Eurokai can be negatively affected though direct publicity to US strains is comparatively low to my data. Total, barely detrimental.Once more a really fascinating case. It might even be that they see extra site visitors from the Asian aspect. |
| G. Perrier | No exports to US to my data, total impartial or barely constructive (Nuclear, protection)No change. The share value hasn’t benefitted in any respect from the protection publicity. |
| Fuchs | Native manufacturing, no exports. Nonetheless, publicity to European Car trade, barely detrimental.No huge change. However clearly some publicity to a quickly slowing financial system. |
| EVS Broadcast | The US was one of many goal markets to develop. For the {hardware} half, Tariffs is likely to be a (small) concern, however I suppose all opponents import their gear. EVS may even have a bonus as they assemble in Europe and don’t import instantly from China. Impartial to barely constructive.No change right here, nevertheless, a recession within the US might after all negatively affect development., |
| Royal Unibrew | No US publicity in any respect to my data.Impartial.No change |
| Thermador | Solely native French enterprise, impartialNo change |
| SIxt (Vz&St) | Sixt has been rising aggressively within the US. It is going to be more durable for Sixt to get (German) premium vehicles sooner or later for the US market. Total, I see barely constructive impacts on Sixt. Throughout writing the put up, Sixt launched Q3 outcomes and guided to the decrease finish of the vary for 2024. Perhaps I’m incorrect, however I nonetheless see the extra upside than draw back.A transparent detrimental for my part are the quickly dropping numbers of inbound vacationers into the US. Sixt’s enterprise within the US is leveraged to tourism and it wil be fascinating to see if home tourism can fill the hole. Elevated tariffs for automotive imports may hit the weaker opponents a lot more durable. A constructive is clearly that residual values of used vehicles will go up considerably, which was an issue for Sixt up to now. Total, the inventory has already reacted fairly negatively. |
| Bouvet | No direct US publicity. The Norwegian financial system continues to be geared in direction of oil & fuel costs. Impartial.Decrease oil costs are usually not constructive for the Norwegian financial system. In any other case impartial. |
| SAMSE | Publicity to the French development and renovation sector. In a roundabout way impacted.No change right here. |
| Hermle | Hermle is a harder case. On the one hand, they’ll clearly endure if the European equipment sector suffers. However, when the US needs to extend its manufacturing capability, this might imply alternative, particularly for Hermle as they want extra machines to provide excessive precision elements and automation. Sure, there can be tariffs, however the Chinese language competitors is likely to be damage far more. That is clearly a inventory to look at intently on which aspect issues will go.Little change right here, nevertheless important publicity to potential US/Europe escalation. |
| Chapters Group | No direct publicity. Impartial.No change |
| Laurent Perrier | The US is the biggest importer of Champagne (15% of complete manufacturing), so there’ll clearly be an affect. The large query is: How massive will the affect be and what’s already mirrored within the present share value ?No change. |
| Robertet | Robertet has important US publicity and is importing a major a part of their pure components. However, their components aren’t simply replaceable. The primary query can be about pricing energy for my part. |
| Bombardier | Bombardier is an fascinating case. On the time of writing, Bombardier is among the few corporations outdoors the US, which isn’t topic to extra tariffs. So in concept they’re even in comparison with their main competitor Gulfstream. Nonetheless, it will clearly not keep that manner. In any case, the main threat for Bombardier can be if Trump will get offended at Canada once more or if demand from the tremendous wealthy would truly drop. |
