The potential for epochal consequences
The actions of US President Donald Trump have the potential for epochal consequences. Trump is particularly dangerous because of his unpredictability and because he offers no economic strategy. In the short term, his protectionist tariff policy will have clearly negative consequences for the US economy and its consumers. The tariffs on imported goods will cause their prices to rise, which is expected to result in lower demand for these goods. There could be a huge outcry among the population if some products become very expensive in the supermarket or even if the shelves remain empty. The components of many American end products come from abroad (globalised value chain), which will also lead to price increases due to tariffs. In many cases, it will not be possible to replace them with domestic American products in the short term.
Zero-tariff solution would be a revolution for global trade
In the face of the threat of domestic political and economic damage, Trump could therefore perform an unexpected U-turn and consider a zero-tariff policy, especially towards Europe, as a strategic way out ("liberation strike"). Elon Musk has suggested this to him, as has Ursula von der Leyen. A zero-tariff solution would be a boon for the North Atlantic countries, and other countries could quickly follow suit. Of course, this revolution for global trade would be a ‘brilliant idea’ from Trump, and he would pass it off as his ‘victory’.
However, if the tariffs remain in place, a significant global economic crisis is likely, with damage that would probably be greater than all the financial crises of recent decades. However, if markets are globally or partially sealed off by tariffs, there could be opportunities for European companies to step into the resulting gaps. However, the successful utilisation of these opportunities depends largely on the unity of the European states and on business-friendly government policies in Germany. However, the fragmentation of Europe and the lack of a genuine single market in areas such as the movement of goods and people pose challenges here.
China on a confrontational course
China sees the tariffs as a trade war. However, it will take its own confrontational path, as relations with the US are characterised by a deeper confrontation and more irreconcilable positions. China can be expected to maintain its own tough tariff policy towards the US and possibly restrict the export of key goods to demonstrate Americans' the dependence on Chinese products. China can afford this approach because, unlike Europe, it does not necessarily need allies.
Pressure on Donald Trump
There is pressure on Donald Trump from several sides: the Democrats are organising the first demonstrations, but Trump is unperturbed by this. But if Republican representatives fear that Trump's tariff policy will cause them to lose the next election by a large margin, Trump could be concerned. In addition, Trump's financially strong supporters could also suffer monetary losses as the stock market, which has been negatively affected by economic uncertainty, reduces their wealth. And last but not least, the mood among the population threatens to change sooner or later if the cost of living explodes and workers grumble about recession unemployment.
Uncertain times in particular offer opportunities for active fund managers
Particularly in times of economic uncertainty and market distortions, such as those that can arise from sweeping reactions to political events (e.g. tariffs), there are opportunities for active fund managers to identify undervalued companies and achieve above-average returns. Our investment strategies are fundamentally geared towards the long term according to the motto ‘Time in the market beats timing the market’. However, as we take a long-term view and do not act nervously, we fund managers at ACATIS will also be able to ride out this phase with the prospect of tracking down high-quality investments at attractive valuations in the midst of the crisis.
What implications, if any, does the tariff conflict have for our funds?
It is not yet possible to reliably predict where the tariff damage will be permanent and where
it will only be slight or even non-existent. Typically, such crises do not pass in a few days. In the best-case scenario, we expect more clarity at the end of this quarter. In some funds, the fund managers or advisors are still waiting, in others action has already been taken. The most important changes can be seen in the following funds:
ACATIS Value Event Fonds
We actively utilised the volatility and selectively increased our equity positions. On the bond side, we sold some of our stabilising government bonds in times of turbulence and moved more towards higher yielding corporate bonds. Nevertheless, we are continuing to hold a considerable amount of liquidity in order to be able to make targeted additions in the event of further market dislocations.
ACATIS IfK Value Renten
No major changes were made as a result of the recent tariff escalations. As a result of the capital market shock, the yield in the fund has risen from around 5.9% to approx. 6.5%. The fund has more cash than usual, and if the market allows, the fund can also buy at more favourable prices, which usually pays off after 6 - 12 months.
ACATIS Datini Valueflex Fonds
So far there have been very few adjustments due to the recent tariff escalations. The fund does not attempt to smooth out volatility.
ACATIS QILIN Marco Polo Asien Fonds
The China-focused fund is now very much in the spotlight, as Chinese companies are at a huge disadvantage due to the US tariffs. We have already sold the world market leader in solar glass, Xinyi Solar, in its entirety. In addition, the tariff dispute naturally also opens up attractive investment opportunities. For example, we are planning to further expand our exposure to the Chinese semiconductor sector, as the Chinese import duties on semiconductors will make Chinese end products that use US semiconductors more expensive, but at the same time they will also further strengthen Chinese semiconductor companies. In addition, we have introduced a downside hedge (with double upside) for around 10% of the portfolio, which is linked to the performance of the China CSI Index.
ACATIS Aktien Global Fonds
We have been sceptical about the USA since the beginning of March and have increased our exposure to other markets. We already reduced the US equity allocation at the beginning of March and increased the Japan allocation with the stocks like AirWater, Lasertec, Rakuten, Terumo and Unicharm. We also had a product designed that benefits from rising US inflation (2-year term, profitable from an inflation rate of 3.15%). At the beginning of March and the beginning of April, we bought out-of-the-money put spreads (long put, short put) for the fund, which offer a degree of partial hedging.
ACATIS Fair Value Modulor Vermögensverwaltungsfonds
In the run-up to the tariff war, we sold Skyworks Solutions (a supplier to Apple) completely and reduced the weighting of US stocks (including profit-taking in Nvidia, Microsoft, etc.) or sold them (US health insurer Centene). We also hedged part of the US equity portfolio at the beginning of March using put options and doubled this in mid-March, as well as implementing another option strategy with different maturities to hedge prices.
Disclaimer
This document is aimed exclusively at professional customers or suitable counter parties in terms of the German Securities Trading Act (WpHG) and is not intended for retail clients. Moreover, this document does not constitute an offer for persons to whom it may not be submitted for legal reasons. The document's sole purpose is to provide information and does not constitute an investment recommendation or a request to buy a fund. The investment opportunity discussed may not be suitable for certain investors due to their special investment objec-tives and financial situation. The opinions offered are valid at the time of publication and may change; the same applies to the fund structure and allocations. While the information is based on carefully selected sources, the veracity, completeness, or accuracy of the information cannot be guaranteed. The information may not be reproduced or distributed. The distribution approvals for the ACATIS funds in single countries and the associated services may vary. ACATIS provides the sales prospectuses, key information documents (KIDs) and annual/semi-annual reports for its funds free of charge (in German) (available at www.acatis.de). ACATIS Investment KVG mbH has its registered office in Germany and is regulated by BaFin, Marie-Curie-Straße 24-28, 60439 Frankfurt.
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