Trump’s next 100 days: Four themes to invest by
There’s an apt saying about what to do during bouts of equity market instability: respond, don’t react. Despite a reprieve from the frenzied volatility of the new U.S. administration’s first few months, caution remains warranted. Four ideas to control for—and capitalize on—the uncertainty.
June 2025
Key takeaways:
- Expect volatility to persist. Protect against—and take advantage of it.
- Seek broad diversification across geographies, sectors and asset classes.
- Consider BMO covered call and long-short strategies for cash flow, diversification, and upside potential.
Liberation Day on April 2 represented Peak Tariff Fear as markets, investors, companies, and policymakers around the globe confronted the immense economic threat of 60-to-70% effective tariff rates on exports to the world’s biggest economy.
The average duty for imports into the United States has fallen significantly since—now to only approximately 17%,1 a rate last seen a century ago and one far steeper than the prevailing average of 2.5% that had been in place for the past two decades. The math behind this number varies by source and worse, by the hour it seems, but the clear point is that a higher tariff regime should be expected for the foreseeable future.
The tariff tumult defined Trump’s first 100 days in office, but what’s important now are the next 100 (and of course, beyond). While past performance isn’t an indicator of future returns, there is some signal we can ascertain from the noise.
Through May, the average number of days between tariff announcements ranged between 1.6 and three. A similar level of information overload was registered at times regarding presidential executive orders. These things in of themselves bear a reevaluation of equity risk, based on the sheer fluctuation of significant policy shifts that may have a pronounced and lasting impact on not only the U.S., but entire global economy. We almost certainly have not seen the last trade flare-up from this U.S. administration, which could potentially even escalate in volatility as legal challenges have now arisen blocking the initial “emergency” tariffs, and will ultimately require U.S. Supreme Court resolution.
With that understanding, there are four directional themes we highlight below, before a rundown of the strategies to express those views.
Themes
- Derisking away from U.S. equities and toward the rest of the world, specifically EAFE (Europe, Australasia, Far East) and some Emerging Markets (EM) tilts. Led by resilient earnings from U.S. mega-cap stocks, the “Buy America Again” trade served to buoy U.S. markets and valuations as they rebounded from April lows. Our view is, economies in the EU and EM are closing the gap against U.S. exceptionalism, both in the near- and long-term. Structural shifts are afoot and a higher percentage of core positioning should be moving away from U.S. exposures.
- Persistent volatility: protect against it—and take advantage of it: Low-vol strategies work best during broad market uncertainty. Going one step further, by “selling” volatility through a covered-call strategy, investors can gain consistent cash flow while maintaining long equity positions in preferred sectors, factors or regions.
- Broad diversification, and looking for hedges against general market volatility through wider asset allocation strategies and asset classes. See below for a range of broad-market diversification options.
- Favour dividend payers. Earnings expectations have unsurprisingly come down from the beginning of the year, from about 15% growth in 2025 over the year prior, to now under 10%.2 That’s still a number reflective of the halo effect generated by the prior “Trump trade”, which assumes growth from tax cuts and deregulation. That doesn’t jive with reduced global trade and manufacturing activity, let alone rising global recession odds. In the midst of a downturn, cash-generative blue chips typically prevail.
Calm before (another) storm?
The VIX since Trump’s inauguration in January
Source: Bloomberg, as of May 30, 2025.
Go international
The BMO International Equity ETF Fund’s objective is to achieve long-term capital growth by investing primarily in equity securities of companies located outside Canada and the United States or other companies that benefit from international exposure. The fund’s top geographies are Japan (20.8%), the United Kingdom (16.4%) and France (12.3%).3
The BMO International Equity ETF Fund
Long-short strategy
Another diversifying vehicle we view favourably in the current market is the BMO Long Short U.S. Equity ETF Fund. Long-short strategies tend to do well when there are major dispersions in an index between winners and losers. Within the S&P 500, there are businesses that are going to do well as a result of shifting U.S. trade policy, and businesses that will not. This active mandate relies on deeply experienced managers finding companies with relative advantages, while recognizing that even the best equities can get overvalued. A long-short strategy takes advantage of both.
BMO Long Short U.S. Equity ETF Fund
Control—and capitalize on—volatility
BMO’s well-established suite of covered call funds utilize options strategies to generate cash flow and potentially reduce downside risk. These funds invest in dividend-paying stocks and sell call options on a portion of their holdings, earning premiums that supplement dividend income.
BMO Covered Call Utilities ETF Fund
BMO Covered Call Energy ETF Fund
BMO Covered Call Europe High Dividend ETF Fund
BMO Covered Call Canada High Dividend ETF Fund
BMO Covered Call U.S. High Dividend ETF Fund
BMO Covered Call Canadian Banks ETF Fund
Dividends, dividends
Dividend funds are another portfolio volatility dampener, that tilt specifically toward businesses with superior free cash flow—which is the lifeblood of a company during times of an economic slowdown. Dividend-paying stocks are also a stable source of cash flow for investors across market cycles.
BMO Global Dividend Opportunities Fund
BMO Tactical Dividend ETF Fund
BMO North American Dividend Fund
Legging into diversified positions across the above strategies as part of a core equity portfolio, in our view, provides prudent stock exposures that can mitigate trade-related disruptions that could persist this year. Amid rocky market conditions, portfolio ballast is essential, while consistent dollar-cost averaging can potentially reward investors with steadier performance.
Please contact your BMO Global Asset Management wholesaler for any additional support and guidance.
1 Yale Budget Lab, May 12, 2025.
2 Bloomberg, as of May 30, 2025.
3 BMO Global Asset Management, as of April 30, 2025. Asset allocations are subject to change without notice.
Performance, Series F (%)
Year-to-date |
1-month |
3-month |
6-month |
1-year |
3-year |
5-year |
10-year |
Since inception |
Inception |
|
3.35 |
-0.53 |
-1.44 |
4.54 |
6.56 |
11.01 |
12.96 |
- |
7.62 |
05-05-17 |
|
Returns are not available as there is less than one year’s performance data. |
||||||||||
7.61 |
-0.38 |
6.29 |
4.40 |
19.65 |
- |
- |
- |
8.97 |
06-16-23 |
|
-7.04 |
-14.31 |
-9.67 |
-5.77 |
-8.34 |
- |
- |
- |
7.29 |
06-16-23 |
|
2.09 |
-2.91 |
-3.46 |
1.70 |
3.35 |
8.62 |
11.02 |
- |
7.06 |
04-28-16 |
|
2.23 |
-0.46 |
-0.35 |
2.23 |
12.84 |
4.71 |
11.48 |
- |
5.79 |
05-14-18 |
|
-7.41 |
-8.08 |
-10.37 |
-6.32 |
3.49 |
6.94 |
10.65 |
- |
7.95 |
04-28-16 |
|
-1.62 |
2.29 |
-3.41 |
2.16 |
16.03 |
5.23 |
13.34 |
- |
8.32 |
04-28-16 |
|
2.27 |
-0.17 |
-2.01 |
3.83 |
17.65 |
8.18 |
11.93 |
8.08 |
8.87 |
11-03-08 |
|
-1.73 |
-3.36 |
-6.01 |
1.05 |
14.91 |
14.59 |
13.66 |
9.60 |
10.11 |
11-11-09 |
|
3.85 |
-0.95 |
1.24 |
0.13 |
5.69 |
6.23 |
3.96 |
3.85 |
4.86 |
08-12-13 |
|
0.76 |
-2.30 |
-1.23 |
3.87 |
12.78 |
6.45 |
11.48 |
4.84 |
5.49 |
07-15-03 |
|
2.27 |
-0.17 |
-2.01 |
3.83 |
17.65 |
8.18 |
11.93 |
8.08 |
8.87 |
11-03-08 |
|
-2.44 |
-3.20 |
-6.70 |
1.23 |
13.49 |
12.57 |
12.51 |
9.19 |
10.74 |
08-12-2013 |
|
-3.54 |
-5.01 |
-8.01 |
-0.30 |
11.90 |
9.22 |
12.41 |
8.66 |
10.97 |
06-24-13 |
|
-3.14 |
-3.50 |
-7.29 |
-0.56 |
10.08 |
10.36 |
14.86 |
10.56 |
10.86 |
11-13- |
|
As of Bloomberg, April 30, 2025. Past performance is not a guide to future performance. Performance is shown net of fees, in the currency of the respective share class with dividends reinvested.
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This article was published on Thursday, June 12, 2025.
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