US President Donald Trump gave up in the end when Democrats took control of the House and eventually reduced his ask to US$1.4 billion. Nowadays, it appears easier for Trump to simply tariff anything and anyone, from imported goods to H-1B skilled labour to tourists and investors alike. As a sign, the US dollar is down 9% this year, making it the worst-performing currency this year.
As the present shutdown, starting Oct 1, crosses its second week, assuming that the Senate vote on Oct 14 fails again, it will minimally rank the fifth longest in history, potentially rising to become the second longest, or 21 days, if it runs for another week. It may even outlast the previous 34-day shutdown, as Trump seems hell bent on using the opportunity to let go of Federal employees in “Democrat” agencies or those pursuing Democratic Party agendas. I am only mildly relieved that I have no trips planned to the US, as unpaid air traffic controllers and understaffed control towers have already led to flight delays. Hopefully, nothing worse.
In addition, shutting down the government gives Trump some other potential benefits. There are no more job figures published, and economic data, which may be inconvenient to his parallel universe of alternative facts and data, simply do not get released. Just as well, as he doesn’t have anyone to fire in the Bureau of Labor Statistics since the last one was let go for releasing negative employment statistics. Ironically, it may make it harder for the Federal Reserve to cut interest rates that Trump so desires, as they have to rely on other proxies to gauge how the economy is doing.
There may already be shifts in the President’s narrative as he sets the scene for a distraction (Antifa and ”war” in Portland and Chicago), to even perhaps an actual war in Venezuela, over and above extrajudicial killings of fishermen or drug runners with missiles. The winner of the Nobel Peace Prize, the Venezuelan opposition leader in hiding, has dedicated her win to him, but Trump desperately needs a narrative to declare a win of his own.
See also: A great year for US stocks? Not compared with rest of the world
As domestic polls are flashing public anger about the impending loss of healthcare, it is likely that TACO (Trump Always Chickens Out) will happen, at pain to the domestic US economy and impacting all until the government eventually reopens. It’s either that or “civil war”, as American billionaire Ray Dalio warned last week. Given the partisan rhetoric, the impending “No Kings Day” protests on Oct 18 are described by Speaker Mike Johnson as “hate America”, “pro Hamas” gatherings.
It confirms my view not to be in US markets, while Nvidia and OpenAI announced deals with circular financing structures, JP Morgan’s Jamie Dimon warned about bursting AI bubbles, much like the Bank of England declaring that “the risk of a sharp market correction has increased” the day before.
The 3% sell-off in the S&P on Oct 9, after Trump’s 100% tariff on China turnaround again, may be the beginning. It may be the catalyst for the bears in the US to gain the upper hand. For investors addicted to buying the US, especially the dips in tech, be warned: TACO or not, clear minds are required, as it will be more than a hangover one will have when the fumes from the Vape run out.
See also: It’s my party and I’ll cry if I want to
We Didn’t Start The Fire
Amid the shutdown, Trump’s biggest disappointment is that the courts are still hearing cases against his unusual use of powers, including trying to send the Texas National Guard to Illinois, a blue Democratic State. On Nov 5, the Supreme Court will decide if Trump’s tariffs, introduced under the International Emergency Economic Powers Act, can stand legal scrutiny. The lower courts had said no. If the ruling is upheld, Trump’s trade deals or his entire approach to using geoeconomics to strike deals without having to ask Congress will go up in smoke, and billions of dollars of refunds of tariffs will be the consequence.
It must be pointed out that Nov 5 is also Guy Fawkes Day, or Bonfire Night. Back in 1605, the Gunpowder Plot to blow up the UK House of Lords by Catholics, intending to assassinate Protestant King James I and his parliament, was thwarted, and now celebrated with fireworks across the UK till today.
One hopes that the fireworks on that night will be celebratory and not the start of the civil war that Dalio speaks of, if the Supreme Court rules against Trump, or vice versa.
Puff the Magic Dragon
In the interim, what is one to make of the Trade War with China 2025 v2.0 unleashed by Trump, fresh off being spurned by the Nobel Peace Prize Committee? “It was shocking”, declared Trump of China’s expansion of rare earth controls, which does not specifically target the US. Less shocking perhaps is the now-again 130% tariff on China starting Nov 1, with a maybe, maybe not meeting with President Xi Jinping in South Korea towards the end of October. In a tit for tat, unspecified software restrictions and export controls for aeroplanes and aeroplane parts were thrown into the mix.
The tariff, once again, if it actually happens in November, will hurt US importers and consumers and mess up inflation data for the Fed, shooting the US consumer in the foot on top of potentially losing Obamacare health insurance, and several hundred thousand federal employees now working without pay or getting laid off in the shutdown. The targeted US export controls will shoot the US tech and aviation industries in the other foot.
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The initial equity market reaction was not as severe as April 2’s “Liberation Day”, save for corrections in more fluffy assets. Bitcoin fell 8.4% in a day to US$104,000, wiping out US$19 billion and generating fears of market contagion, counterparty exposure risk in the less mature and opaque crypto market infrastructure. An unprecedented 1.6 million traders were liquidated in 24 hours, according to Coinglass, including US$7 billion sold off in an hour. There are even stories of crypto bros in Kyiv committing suicide. It seems “digital gold” did not do its job as an uncorrelated alternative store of value, as the underlying price was questionable, puffy, and speculative.
On the other hand, gold extended this year’s gain from September and hit a record US$4,000 as the legions of gold bugs were hoping for. JP Morgan promptly followed through with a US$4,900 call for the end of 2026. I was lucky to lock in a gain of 8% on the SGD Gold ETF using my CPF 10% limit in the three weeks. It promptly reversed to US$3,940 when the Gaza peace deal was announced, and despite the 3% US equity sell-off, recovered to trade just above this milestone number. I will not be wading back in unless there is a reasonable pullback.
Notwithstanding its proven abilities to be an alternative hedge to global equities, if the US market continues to correct from lofty AI valuations, other profit takers, too, may come in.
China predictably kept a stiff upper lip and diplomatic decorum in contrast to Trump’s outburst. The Commerce Ministry simply declared: “Threatening to impose high tariffs at every turn is not the right way to engage with China… should the US persist in its course, China will resolutely take corresponding measures to safeguard its legitimate rights and interests.”
Perhaps both the US and China are posturing and exerting leverage on each other before an originally scheduled meeting between the two Presidents. Or perhaps it is a random tempestuous reaction from Trump on a bad day, or China reactivating a playbook used successfully in April to force a negotiation reset.
There is more confidence and support in its domestic economy and equity markets now, coupled with an expectation of some form of US TACO. Any correction will be timely, given the good run-up pre-Golden Week. I suspect, however, my hope to buy a Chinese market dip as postulated in January may still not be fulfilled this month. I will stick to my Chinese REITs listed in Singapore, like CapitaLand China Trust and Sasseur Reit, both of which are fetching high single-digit yields.
Nowhere to Hide?
Between TACO hopefuls expecting a Trump reversal lifting US equity markets again, and those fearing an April global markets rout, Chew on This believes that both may not happen. For instance, since April’s market shock, there have been both global and local trends that suggest that global markets other than the US may hold steady, and US markets, even if TACO transpires at some point, may not recover their heights.
On a relative basis, the S&P500’s 40 times earnings is not equivalent to a fluffy US$122,000 price of Bitcoin, but it is certainly loftier than many global markets, even Singapore, which, despite being at record levels, is trading less than half that level.
Data from fund tracker EPFR by Societe Generale has shown that investors have been channelling more into global equity funds, specifically excluding US equities, than those that include them for the first time in years. This may explain why stock markets ex-US, including Europe and emerging markets, and our own STI have outperformed the US this year, even more so adjusted for US dollar depreciation.
One will never know what is on the mind of Trump, and in any case, he can change it in the next moment. This latest tariff flip-flop, in all likelihood, hastens the repatriation of international capital from the US. If so, any dips in local markets, not US stocks, may be buying opportunities for us.
Chew Sutat retired from the Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange. He was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
