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Letter from America: Trump’s truckload of tariffs

The managers of The North American Income Trust discuss a busy two months for US markets…

If a week is always a long time in markets, the two months since President Trump’s second inauguration have seemed near to an eternity.

The pace of change under the returned president has been breathtaking. Seemingly every day, a new policy announcement has rocked both the political establishment and markets. Given just how much the administration has done in that time, we thought it would be worth taking a moment to reflect and remind ourselves of how US markets have fared in 2025 so far.

Tariffs, baby, tariffs

In terms of their impact on markets, President Trump’s tariffs are surely the most notable feature of his second presidency so far. On February 10, a presidential proclamation announced tariffs on all imports of steel and aluminium. These tariffs would have a significant effect on both Canada, the US’s largest supplier, and the European Union, which both announced counter tariffs.

The immediate impact of these tariffs was felt by the industries expected to be most affected, such as automobile and appliance companies. Both have seen a fall in share prices. However, a decline in economic sentiment more widely – such as consumers being depressed by repeated negative headlines – could impact other industries, like airlines. Indeed, the sector has seen a revision in earnings forecasts already.

The long run real impact of the tariffs remains unclear though.

The less Magnificent Seven

Elsewhere in the first quarter, we saw the (in some corners much anticipated) stutter in the rapid ascent of the Magnificent Seven. We say ‘elsewhere’ because the trade rhetoric had, at worst, a secondary impact on them.

Instead, Deepseek’s claims surrounding the development of its own AI model called their escalating share prices into question. Deepseek claimed that its model used less sophisticated chips – and fewer of them. It’s worth noting that a lot of the market had already started cooling on the Magnificent Seven, as seen by several individual days of volatility in 2024. For both valuation and yield reasons, we hold just two of the set in our portfolio.

Nonetheless, the apparent end of the Mag 7’s run does mark a new chapter for US markets.

Same as it ever was?

As some of our colleagues have already pointed out, a drawdown (more than 10% fall) in the US market isn’t exactly unprecedented. Over the past four decades, almost half of these years have featured such a fall in the US market. While no future is guaranteed, historically, the market has recovered – and thrown up new opportunities in the process.

However, we are not there yet. In our next letter, we will outline how we are investing in a market like this…

Portfolio

A grouping of financial assets such as equities, bonds, commodities, properties or cash. Also often called a ‘fund’.

Valuation metrics

Metrics used to gauge a company’s performance, financial health and expectations for future earnings, eg. price to earnings (P/E) ratio and return on equity (ROE).

Volatility

The rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility the higher the risk of the investment.

Yield

The level of income on a security over a set period, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.

Disclaimer

Janus Henderson Fund Managers UK Limited was appointed as the AIFM of the North American Income Trust with effect from 1 August 2024. Prior to that date, the North American Income Trust’s AIFM was abrdn Fund Managers Limited and all information contained in this document should be considered accordingly.

References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

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Not for onward distribution. Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions. Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

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