Capital markets continue to face the political dynamics surrounding Donald Trump's presidency. Kay-Peter Tönnes, founder of Antecedo Asset Management, identifies these political developments as the primary influencing factor for investors until the end of the year. This, he says, is overriding the traditional economic outlook question. Tönnes forecasts that short-term political 'shocks' could affect prices and risk premiums both positively and negatively.
Tönnes observes increasing domestic pressure on the incumbent US President. Given a discernible deficit in important congressional elections, which cannot seemingly be compensated for by structural measures alone, Trump is dependent on regaining votes to maintain his political influence. A loss of the majority in the House of Representatives, and in extreme cases also in the Senate, would significantly restrict his domestic political scope. Budget, legislation, and the debate surrounding the debt ceiling could then become obstacles.
Foreign Policy Capacity and Market Relevance
The market relevance of these developments stems from the observation that a US President remains capable of foreign policy action despite domestic political blockades. Tönnes expects that Donald Trump might, during such phases, potentially resort to larger, symbolic international actions to preserve his 'winner image'. This carries corresponding surprise potential for the markets. Tönnes emphasises here that, with political actors like Trump, unexpected developments must always be anticipated.
According to Antecedo, the increased market influence of political factors can be seen in volatility. Spikes in the VIX, often understood as an indicator of market uncertainty, have repeatedly correlated with specific political events in recent years. If the VIX rises, a decline in stock markets is frequently observed. This is not a singular effect but suggests that a accumulation of political shocks transforms short-term irritations into a structural risk area.
Increased Risk and Need for Action
Politics, in Tönnes' assessment, is only one element of a complex overall picture. He identifies an increased number of global risk factors, including historically high debt levels, persistent inflation, and low dynamism in corporate earnings beyond individual market segments. While the technology sector contributes significantly, many other market areas are stagnating. Antecedo has developed its own risk scoring model, which estimates the probability of a substantial market downturn over 24 months. Historically, the probability of a decline of 15 percent or more was six to seven percent. Current results from the model, however, show a value of over 25 percent, the highest level measured to date.
Although this does not constitute a definite forecast, it signals an increased need for action in risk management. From this, Antecedo derives recommendations for investors:
- —More flexible equity allocation and consistent profit-taking during market rallies.
- —Maintaining strategic liquidity.
- —Selective longer maturities in the bond sector.
- —Considering fund solutions with option and volatility strategies.
He stresses that mere diversification might be insufficient during stress phases when correlations between asset classes are rising. Instead, building blocks are needed that can benefit from increased volatility.
