Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Chief Investment Strategist
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Markets have staged a notable recovery from the shockwaves of early April, when President Trump’s renewed tariff threats sparked a selloff. Financial conditions have eased, high-yield spreads have narrowed, and equity indices — led by U.S. tech — have clawed back losses. Some see this as a sign that the worst of the tariff pain may be behind us.
But the calm may be misleading.
While formal deadlines may shift, the direction of travel is clear: the U.S. is pursuing a sweeping reset of its trade relationships. July 8 is emerging as a critical test — that’s when the current 90-day pause on so-called “reciprocal” tariffs expires.
Without clear deals in place or a climbdown from the U.S., broad-based tariffs could snap back into force, with far-reaching implications for supply chains, inflation, and geopolitical alignment. Investors betting on a smooth resolution may be overestimating the room — and the time — for compromise.
This time around, negotiations aren’t just about the size of the trade deficit. A comprehensive deal will require tackling the structural irritants that have accumulated over decades:
This is where the narrative of a swift resolution begins to break down.
Trade deals of this magnitude usually take years — not weeks – of negotiation, deep legal frameworks, and mutual compromise. While the U.S. may attempt to secure interim wins through MOUs (memoranda of understanding), such instruments are unlikely to satisfy key partners like China — especially where core strategic priorities are involved. Beijing is not expected to play along with superficial gestures. And with the U.S. floating demands across multiple fronts, time is rapidly running out.
Each country’s negotiation profile is unique, shaped by domestic priorities, political dynamics, and long-term strategy. The examples below highlight the breadth of issues at stake:
Even if we’ve seen peak tariffs, the deeper risk lies in a prolonged period of trade fragmentation and policy unpredictability. Investors should look beyond short-term relief rallies and ask: Is my portfolio still too concentrated in the U.S. market?
U.S. assets have long served as the default anchor of global portfolios — but in a world defined by regional blocs, political frictions, and supply chain realignment, that anchor may no longer offer the same security.
Key strategic themes that investors could consider for reallocation away from the U.S. include:
Saxo offers curated shortlists aligned with both European independence and China innovation themes — helping investors position for the structural shifts shaping the next era of global trade.
That said, both themes carry risks.
Still, in a world defined by policy divergence and economic realignment, exposure to these long-term themes can offer useful diversification, especially for investors looking to reduce U.S.-centric risk. While these opportunities won’t be without volatility, thoughtful allocation across Europe and China may help position portfolios for resilience as the global trade landscape evolves.