- Global stocks rebounded as US-China started de-escalating. Trump paused trade escalation with the EU, extending the deadline before introducing a 50% tariff on all EU products.
- Trump sweeping tariff agenda was legally challenged in the US.
- Moody’s downgraded the US ‘government´s credit rating from Aaa to Aa1, citing concerns over the country’s ballooning budget deficit and rising debt.
- Trump’s “one, big, beautiful bill” is raising concerns on the bond market.
- The HESPER FUND – Global Solutions rose 1.2% in May as markets rebounded on trade truce. Year to date performance is at 0.33%.
- The HESPER FUND adjusted its portfolio frequently to cope with an uncertain but less anxious market mood.
Tariff angst roils markets
HESPER FUND – Global Solutions Macro scenario: the worst case is off the table
Deal negotiations were ongoing in May as countries rushed to the negotiation table. The chaotic rollout, pause, and rollback of tariffs highlighted the limitations of Trump’s piecemeal approach to global trade.
Legal obstacles also emerged, further raising uncertainty, as a US court suspended the bulk of Trump’s tariffs, and an appeals court paused that decision.
Challenging the President’s authority to impose trade tariffs further reduces the chances of rapid trade deals. The outcome of the legal battle remains uncertain, and the struggle could eventually reach the Supreme Court.
Monthly performance and current positioning
The HESPER FUND – Global Solutions (T-6 EUR) rose 1.2% in May as market angst settled down. In any case it was not a month without surprises. Total assets rose to 51.6 million EUR. Volatility over the past 250 days remained stable at 6.1%. The annualised return since inception accelerated to 3.13%.
Rather than being driven by an external shock, market confidence this time was influenced by the US president’s plan and frequent turnarounds. Trump’s propensity to make threats, scare the market, and then pull back caused higher volatility and forced Hesper to frequently adjust its positions to a rapidly evolving scenario.
During the month, the fund reduced US-Dollar duration and raised euro duration (overall at 4.2 years), increased equity exposure up to 33% - mainly in Europe - and closed a brief short dollar position. Exposure to the Norwegian krone, the Swiss franc and gold was kept relatively stable averaging 15%.
Performance in May (1.2%) was as follows: -0.09% fixed income instruments, 0.81% equities, +0.13% commodities, 0.45% currencies and -0.10% fees and expenses.
Outlook: Trump-era tariffs and Policy Volatility Reshaped Risk Frameworks
The aggressive economic, political and geopolitical policy shift in the US will have a significant impact on the global outlook of 2025 and beyond. The world order is shifting, with high level of uncertainty. This evolution, partly triggered by China rivalling the US in economic and technological terms, marks a transition from the post-World War II order.
International investors, especially in Asian countries, have a growing list of reasons to seek alternatives to US-based assets: there’s a growing budget deficit, a widening political polarization, and a major geopolitical and diplomatic shift away from the established post-war dynamics.
Trump’s attempt to tear up the economic playbook that has underpinned US prosperity for generations is endangering the dollar`s as the world’s primary reserve currency and denting US Treasuries as the main risk-free asset upon which the entire financial system is based. The gradual shift from hoarding dollar assets to doubting US exceptionalism may have already begun.
As a result, we are reviewing our dollar stance, which is currently neutral (zero net exposure), and exploring options for what may be a long-term stealth trend. Given the high policy uncertainty, we remain cautious with maintaining low exposure across most asset classes and avoiding large, concentrated bets for the moment.