The recent surge in global markets continues unabated, despite potential policy changes that could challenge the long-standing economic dominance of the United States, according to Nigel Green, CEO of global financial giant deVere Group.
On Tuesday, the S&P 500 reached a record high, with Europe's Stoxx 600 also achieving new peaks. Investors are driving up equities, seemingly undeterred by policy changes that could alter the landscape of global trade and financial markets.
Green highlighted the White House's aggressive policy stance, which includes not only tariffs but also sweeping regulatory changes, fiscal overhauls, and direct intervention in industry policy. Despite the significant changes, investors seem confident that the market's upward trend will continue, he noted.
A key risk is the administration's plan to selectively impose new tariffs on major US trading partners, including Canada, Japan, the European Union, India, and Brazil. These tariffs, aimed at punishing what Washington sees as unfair trade practices, could provoke retaliation, increase costs for businesses and consumers, and disrupt global supply chains.
Green warns that markets may be underestimating the broader implications of these policies. He describes the current moment as one of unprecedented economic interventionism, cautioning that complacency could be a warning sign.
The US economy has long thrived on stability, predictability, open trade, and leadership in global markets, all of which are now being tested, according to Green. He suggests that if these tariffs lead to a full-scale trade war, the United States could lose its standing as the most secure and reliable investment destination, posing a direct threat to US economic exceptionalism.
The US economy remains strong, but markets are treating this period of extreme policy intervention as if it were business as usual. Green warns that if tariffs lead to retaliatory measures from trading partners, industries such as technology, automotive, and consumer goods could face rising costs that eat into their profit margins. If supply chain disruptions intensify, growth forecasts may need to be revised downward. And if escalating protectionism sparks broader economic uncertainty, investors may need to reconsider their positions.
Green adds that while markets are pricing in continued economic strength, they are overlooking the risks that are accumulating in the background. If the pace of policy change continues, investors should anticipate increased volatility, not the currently subdued levels.
Green concludes that confidence is crucial in financial markets. The US has long been viewed as the most reliable investment destination, but if these policy shifts introduce new layers of uncertainty, that perception could change.