Trump's trade tantrum, and stock market: The ABCD strategy of investing

For Indian retail investors, this is not a moment for fear but a moment for foresight, says Sandeep Walunj of Motilal Oswal Financial Services.

Trump’s unpredictable and transactional approach to trade—especially with partners like India—could trigger short-term market volatility. But structural geopolitical trends, such as the potential US-India Free Trade Agreement (FTA), the India-EU FTA, the China+1 strategy, and evolving BRICS dynamics, are tilting the balance in India’s favour.

 

Even if Trump’s return stirs disruption, Indian investors are better positioned today. Global resistance to US hegemony, rising inflation concerns in the US, and India’s growing strategic autonomy act as counterweights. Navigating this terrain requires smart thinking across three horizons: short, medium, and long-term.

SHORT TERM (0–6 months): Defensive, yet opportunistic

Context:

• Trump’s tariff threats may drive up US input costs, reviving inflation fears and pressuring the Fed. 
• Rising voter disillusionment in the US may reduce Trump’s leverage in global negotiations. 
• India and others are asserting more confidence in trade dialogues.

Strategy:

• Underweight export-dependent sectors, especially those heavily exposed to the US.
• Focus on domestic-facing sectors like utilities, FMCG, and healthcare.

Hedge for volatility and inflation:

• Allocate to gold if the dollar weakens due to loose US fiscal policy.
• Use short-duration debt funds for flexibility in a shifting rate environment.

Track institutional flows: If foreign investors exit, buy the dip in quality large-cap Indian stocks.

MEDIUM TERM (6 months – 2 years): Align with global reordering

Context:

• If Trump’s policies underdeliver, he may soften his stance, re-engaging global trade.
• India’s rising clout strengthens its negotiating hand in FTAs.
• Persistent US inflation may drive capital flows to emerging markets like India.

Strategy:

Thematic investment opportunities:

• China+1: Focus on manufacturing, chemicals, electronics, and industrial real estate.
• Green tech and digital: Ride India’s alignment with EU sustainability and tech goals.
• BRICS-aligned exposure: Explore funds focused on economies less reliant on the US.
• For global diversification, favor Asia-Pacific or EU-centric ETFs over US-heavy ones.

 

LONG TERM (2+ years): Bet on India's Strategic Autonomy

Context:

• The world is transitioning from US-led unipolarity to multipolarity.
• BRICS+ nations are working on alternative financial frameworks, including digital currencies.
• India is walking a fine balance: engaging with the Quad on security, BRICS on economic cooperation, and FTAs for trade leverage.

Strategy:

• Anchor your core portfolio in India's long-term growth sectors:
• Infrastructure, BFSI, green tech, defense, and semiconductors

Use geopolitical hedges: 

• Gold and sovereign gold bonds for macro shocks and inflation.
• REITs if domestic rates ease.
• Global allocation: Maintain 10–15 per cent in global funds diversified across developed (EU, Japan) and emerging markets (ASEAN, Africa).
• Reassess Trump’s long-term impact by 2026: If his domestic economic outcomes are weak, his external trade aggression may lose steam.

 

Framework for Retail Investors: The “ABCD” Strategy

    Pillar Focus Why It Works A – Allocate Smartly Mix equity, debt, and gold Manages volatility and aligns with personal goals B – Build Thematically China+1, BRICS, FTAs Captures emerging global economic shifts C – Cushion Risks Diversify globally, use hedges Shields against Trump-led disruptions D – Discipline via SIPs Automate investments Removes emotion, ensures long-term consistency   Final word

As of May 28, a US court ruled that Trump’s April 2 tariffs exceeded his emergency powers—a legal setback that markets welcomed. Combined with warnings from the Federal Reserve about Trump-induced inflation risks, the judgment reflects a broader reality: the world is pushing back.

 

Yes, Trump’s return may inject short-term volatility, especially in global trade and financial flows. But the deeper story is far more significant: inflation risks in the US are rising, global institutions are becoming more assertive, and emerging powers like India are finding their footing in a shifting world order.

 

India is no longer just weathering storms—it is actively shaping its strategic space in a multipolar world. With its increasing confidence, stronger trade positioning, and balanced diplomacy, India is less vulnerable to the whims of any one global leader.

 

For Indian retail investors, this is not a moment for fear. This is a moment for foresight.

 

Trump may cause noise, but the real signal lies in long-term global realignment. Structural changes in the global economy are unfolding—and they present a rare, powerful opportunity to invest with resilience, clarity, and a global mindset.

 

Let Trump tantrums pass. Let strategy lead the way.    (Disclaimer: This article is by Sandeep Walunj, executive director & group CMO, Motilal Oswal Financial Services. Views expressed are his own.)