Trump's Decisions: Weighing the Risks for Investors
Impact of Potential U.S. Military Engagement on Financial Markets
By Christina Lohner
As market watchers, we've got Donald Trump on our minds, but not for the reasons you'd think.
There's a looming shadow over stock markets due to a potential Middle East conflict, with reports suggesting a US intervention against Iran could be imminent. However, capital market expert Stefan Riße advises investors not to fret about their stocks on this account—it's a different concern that should catch your attention.
Political Musings
Donald Trump, known for his off-the-cuff national security musings, is keeping everyone on their toes. According to Riße, the US's military superiority—when compared to Iran—would limit any impact on stock markets if an intervention were to happen. The US's air superiority makes it unlikely that other countries in the region would dare challenge America. Therefore, Riße doesn't anticipate a regional conflagration. As for oil supply, he expects a four-week bottleneck if tankers can no longer pass through the Strait of Hormuz. More significantly for China, which buys more oil from Iran, this means increased imports from Russia. Economically, there's nothing too dramatic brewing.
But here's the kicker: Trump's otherdiplomatic endeavors pose a greater risk to stock markets. We're talking about the ongoing trade war and immigration policies that could stoke inflation. An uncertain agricultural workforce challenged by immigration policies and reduced investments could find their way into inflated costs and, ultimately, inflation.
"I wouldn't sell stocks because of the Iran war", Riße says. "But we're currently taking a more cautious stance due to market valuations."
Economics 101
Given how the US S&P 500 has performed at such valuations, Riße expects limited gains for the coming years. With tariffs and immigration policies stirring up uncertainty, investors have reason to exercise caution.
Toeing the line between international trade tensions and potential military conflicts, Trump's moves could indeed deliver a double whammy to investors. Stay tuned for more updates!
Source: ntv.de
Digging Deeper:
- Trump's tariffs have led to increased costs for American consumers and companies, amounting to a significant tax increase of around $400 billion due to the high tariff rates[3].
- Retaliatory tariffs from China have exacerbated the trade war, causing a downgrade in global economic growth forecasts. J.P. Morgan lowered China's 2025 growth forecast, predicting negative spillover effects on the US economy in terms of weaker exports, consumption, and investment[3].
- The stock market has shown resilience despite the implementation of tariffs, recovering from initial losses since early 2025, but some strategists warn of limited further gains due to market vulnerabilities[2].
- The community policy concerning Trump's ongoing trade war, involving increased costs for consumers and companies, could potentially stoke inflation, which is a significant concern for investors and might impact employment policies.
- In the context of Trump's decisions, investors might want to pay attention to the politics involved in the trade war and potential immigration policies, as these issues could have implications on the finance sector, particularly through investing in areas affected by uncertain agricultural workforces or economic volatility.
