Hoped for the best, got the worst

While we were, of course, hoping for a positive outcome on Liberation Day, it took no more than 20 minutes into yesterday’s Trump press conference to realize we got the worst.

Our initial, unfiltered takeaways are the following:

1. What we are witnessing looks very much like a declaration of a trade war against the rest of the world. Global trade flows and economic growth will likely suffer.

2. Based on every piece of economic theory we’ve encountered, tariffs do not benefit any nation economically — including the one imposing them.

3. These measures are not just economic tools; they are instruments of brute force, applied indiscriminately to allies and adversaries alike, sowing division. (Note the 10% tariff for the UK vs. 20% for the EU.)

4. Economic retaliation is now all but certain.

In the medium term, this setback may well be an opportunity to forge new partnerships outside of the US and for Europe to finally stand up and assert greater economic independence. But in the short term, it simply adds to the prevailing uncertainty.

Financial markets seem to be arriving at the same conclusion: the Nikkei dropped 3.18% this morning, the HSI is down 1.6%, European equity futures are off by 1.7%, and US futures are down 2.7%.

In times of doubt, we remain true to our investment philosophy: identifying and investing in businesses around the world with undervalued earning power.