Australia’s $4 trillion super sector is as exposed to the US market as it has ever been, with allocations to international shares hovering around 30 per cent for most large funds.
Foreign investors – including our super funds – are selling, but they haven’t really started to unwind the $US16 trillion ($26 trillion) position they have built up in US stocks. Hartnett says that for every $100 of inflows into the US market since Trump’s election victory last November, there has been less than $1 of outflows in recent weeks.
“Global investors are not anywhere close to short US or global equities,” Hartnett says. “Bad news could have bigger impact than good news.”
In other words, bad news on tariffs on April 2 – and the Bank of America view is that tariffs jump from an average of 2 per cent or 3 per cent to about 10 per cent – is still not priced into markets, even after the S&P 500 correction.
Investors are going to have a hell of a lot to chew on over the next week or so. A well-sourced Bloomberg report on Sunday suggested the reciprocal tariffs could be more targeted than the market fears, with some exemptions possible for countries that Trump doesn’t think “cheat” on America.
But Trump and his inner circle are still talking about raising trillions of dollars from tariffs over the next decade, and tariffs do appear to be a part of a broader plan to use a combination of sticks and carrots to reduce the US budget deficit by re-imagining America’s position in the world.
