Trump’s Tariff Tantrums Rock Sentiment, but Fund Managers Still Flock to US Equities

Stock markets are, intrinsically, prone to volatility and not every investor hones the skill to navigate periods of extreme turbulence, especially at times when uncertainty spreads like wildfire and sentiment plummets. One such episode unfolded following US President Donald Trump’s April 2 ‘Liberation Day’ announcements, promising a slew of retaliatory tariffs that sent shockwaves through global financial markets, particularly in the US.

What ensued was a wave of bearishness across Wall Street. Analysts jumped on the wagon to forecast an imminent recession in the world’s largest economy due to Trump’s tariff policies, one that they warned, could disrupt the global trade order. The immediate reaction was brutal—a bloodbath across global equities, particularly the US, and a widespread narrative of looming economic peril.

Yet, despite the wrath sparked by Trump’s tariff offensive, US equities mounted a surprising recovery. By month-end, Wall Street had not only steadied but also managed to claw back much of the ‘Liberation Day’ losses. The rebound defied expectations, especially among those who had braced for a prolonged downturn. While uncertainty still hangs over Trump’s tariff strategy and its potential to disrupt global trade, the contrarian investors who dared to buy into the slump emerged as the true winners.

The episode reinforced an age-old investing principle, expressed to perfection in this adage by renowned American investor Bill Miller: “As is often the case in financial markets, when opinions are all on one side, the opportunities are usually on the other.” Investors, who resisted the widespread pessimism and backed US markets when confidence stooped to a low, were rewarded.

Despite the dilly-dallying around trade tariffs and Trump’s hardline strategy, Indian fund managers also continue to vouch for US stocks. Why? Because in spite of its flaws, the US remains the powerhouse of tech advancements and in reality, there is no alternative to Wall Street when it comes to the scale of companies listed and liquidity available, combined with one of the most resilient economies and also the greenback.

The US dominates the global stock market, making up over 60% of total market capitalisation, largely driven by its behemoth tech sector. In comparison, India’s share remains miniscule, comprising just 2–3% of the global market.

“Whilst we have seen a slight slowing in the economy, the US economy has historically been remarkably resilient, and with access to the most sophisticated and liquid capital markets, it remains an attractive destination for investors,” says Ross Maxwell, Global Strategy Operations Lead, VT Markets.

To that effect, Maxwell further believes that the regulatory protection set in place for investors in the US, one that is not always available in emerging markets, also evokes confidence in placing capital there even in volatile times.

Also Read: Is Wall Street Losing its Grip on Market Influence? India, China Signal a Shift

Viram Shah, co-founder and chief executive, Vested Finance voiced a similar opinion. “Tariffs or not, writing off US stocks might be premature. Yes, Trump’s trade threats are back in the headlines, and yes, they’ve dented sentiment, but they’ve also brought valuations back to earth. The S&P 500 now trades at around 19x forward earnings, below its 5-year average of 22x, making US equities more attractive to global investors,” Shah says.

World Wide West

Sitting at the helm of global tech innovations, the US market becomes even harder to shrug off. With global tech leaders listed on Wall Street and operating across international markets, investors have a range of opportunities to diversify their portfolios. What matters even more is that while President Trump’s tenure will last only four years, these tech giants will continue to rule the business in years to come.

“The US tech sector still leads the way in innovation, scale and profitability, even in the face of emerging competition from the Chinese tech sector. Even after the emergence of DeepSeek, the major US firms such as Apple, Microsoft and Nvidia continue to play foundational roles in AI and digital infrastructure,” Maxwell adds.

Meanwhile, the recent market rout also eased valuations of several top-tier tech stocks, providing investors with an attractive entry point. “Tech giants like Apple and Microsoft are already down over 10% from their 52-week highs, despite strong fundamentals. Meanwhile, Q1 FY25 earnings growth is holding firm at 10.1%, with 73% of S&P 500 companies beating earnings-per-stock (EPS) estimates,” Shah adds.

Even stripping out the Magnificent Seven tech names that often grab headlines, Arindam Mandal, who heads global equities at Marcellus Investment Managers, said that the beauty of investing in the US is that it offers opportunities across a wide spectrum of themes and investment styles.

“You don’t necessarily need to own Nvidia or Tesla to do well. In fact, our portfolio has delivered mid- to high-teens earnings growth without owning either. That’s because we focus on concentrated portfolios and bottom-up stock picking, so the breadth and liquidity of the US market works to our advantage,” Mandal says.

Mandal further pointed out that the broader market has also remained largely flat in the last 2.5 years, a stark contrast to the Mag7 stocks that soared to higher highs. “Whether this is structural or cyclical remains to be seen. But if it’s cyclical, that opens up opportunities in several high-quality, heavily moated US businesses, which are now trading at attractive valuations,” Mandal adds.

Worries Prevail, but So Do Growth Prospects

Even while several fund managers still see US equities through a lens of attraction, it does not follow that it will be a smooth sailing ride from here. There remains considerable uncertainty around the implementation of Trump’s tariff plans and the broader impact it may have on the global economy. In light of this, money managers advise Indian investors looking to gain exposure to US markets to adopt a long-term perspective, of around five years, rather than chasing quick bucks.

Mandal states that even the mammoth US tech sector is not a monolith and hence, some segments may face pressure, be it from DeepSeek or Huawei’s recent semiconductor advances.

“However, it is still early to predict long-term disruption. What’s important is that the US, as a free-market economy, continues to foster innovation and business model evolution. Not all tech moats are alike, and cycles differ. But for thoughtful, valuation-conscious patient investors, US tech would provide opportunities in the long term,” he explains.

Meanwhile, Shah offered a more optimistic view, stating that while there is uncertainty over how tariffs might impact future corporate margins or trade flows, some of that risk already seems priced in. “And with a GDP growth forecast of 1.8% for 2024, investors focusing on resilient, undervalued names may find long-term opportunity in a market that still leads globally in breadth, innovation and financial strength,” says Shah.