How Trade Wars and Economic Shocks Are Reshaping Market Trends
Global markets are once again at a crossroads, as U.S. President Donald Trump’s trade policies introduce a fresh wave of uncertainty. According to Amit Jeswani, Founder of Stallion Asset, these tariffs could be the most significant economic disruption of the year—one that has the potential to redefine market leadership, investment strategies, and global trade dynamics.
The stock market is witnessing its fifth consecutive month of decline, and Jeswani believes that tariffs will be the next key driver of market movements. He asserts that just as previous economic shocks like COVID-19 and the Russia-Ukraine war led to new winners in the financial markets, the April tariff adjustments could trigger a massive reshuffling of leadership across sectors.
“Market trends are shaped by disruption. COVID-19 forced China to reduce exports, which created a tailwind for chemical stocks. The Ukraine war fueled demand for defense stocks. Now, the next major shift is expected in April when new tariffs take effect. With a 20% tariff on China and 0% on India, Indian companies could gain a significant advantage, opening up major opportunities for alpha generation,” Jeswani stated.
Highlights:
- Trump’s tariff policies could create new market leaders, much like previous global disruptions.
- India is poised to benefit, as U.S. tariffs on China could shift global supply chains.
- Neglected sectors could emerge as future winners, replacing the currently dominant industries.
- 2025 is likely to be a year of capital preservation, with major growth expected in 2026-2027.
Market Leadership Shifts: Lessons from Previous Disruptions
Jeswani pointed to historical examples where major global events led to the emergence of new market leaders.
- During COVID-19, sectors such as pharmaceuticals, chemicals, and IT surged, as they were in high demand amid the global crisis.
- The Russia-Ukraine war boosted defense stocks, as nations increased their military spending.
- In 2021, PSU (Public Sector Undertaking) stocks, which were previously overlooked, became some of the biggest market winners after the initial pandemic phase.
This pattern suggests that investors need to look beyond currently popular stocks and identify undervalued sectors that have strong potential for growth in the next market cycle.
“The biggest opportunities often arise from sectors that have been overlooked but still possess strong intrinsic value. That’s where the next wave of market leadership will begin,” Jeswani emphasized.
Why 2025 Will Be a Year of Capital Preservation
While many investors are searching for the next high-growth opportunity, Jeswani warns that 2025 may be a challenging year for generating substantial gains. Instead, he advises focusing on capital preservation as the market undergoes a prolonged consolidation phase.
“The key to navigating 2025 lies in protecting capital. If we can get through this year without significant losses, we will be in a strong position to capitalize on the next wave of high-growth stocks,” he explained.
Factors That Could Make 2025 a Tough Year for Investors
- Extended bear market cycles: Historically, bear markets last 9-12 months, often followed by periods of consolidation before a strong recovery.
- Uncertainty around global trade policies: Trump’s tariffs on China and other economies introduce new risks for global trade.
- Rising interest rates and inflationary pressures: Central banks are still grappling with inflation, leading to tight monetary policies that could slow down economic growth.
- Market volatility ahead of U.S. elections: As the U.S. presidential election in November 2024 approaches, political uncertainty may lead to unpredictable market swings.
Investment Strategies for 2025
- Prioritize capital preservation over aggressive investments.
- Look for undervalued stocks with strong fundamentals and long-term potential.
- Monitor macroeconomic trends, particularly trade policies and global supply chain shifts.
- Diversify across multiple sectors to hedge against geopolitical risks.
2026-2027: A New Bull Run on the Horizon?
Despite short-term challenges, Jeswani remains optimistic about the medium- to long-term market outlook. He predicts that once the consolidation phase is over, 2026 and 2027 could present lucrative opportunities for investors.
“If we can weather this phase, the next bull market will create high-growth opportunities in sectors that have been ignored for years,” he said.
Potential Market Leaders for the Next Bull Run
- Industrial and manufacturing stocks: The push for local production and reshoring efforts could benefit India’s industrial sector.
- Defense and aerospace companies: With geopolitical tensions persisting, the demand for defense stocks is expected to remain strong.
- Undervalued value stocks: Companies with low valuations but strong earnings growth potential could lead the next rally.
Final Thoughts: Disruptions Create New Investment Opportunities
From Covid-19 to geopolitical tensions and now Trump’s tariffs, every major disruption has reshaped the global stock market, creating new winners and losers. Investors who can identify undervalued opportunities during uncertain times will be best positioned to benefit when the next bull cycle emerges.
As April’s tariff changes come into effect, the Indian stock market could see significant shifts, making it a critical time for investors to closely monitor global trade developments and position their portfolios for the future.