For investors who are seeking a favorable environment to invest their bonds, a recent survey may have some intriguing insights. Generated by a renowned US consulting firm, the survey reveals a significant shift in global favorability for two of the world’s major economic players, China and the United States.
An Upward Trend for China
According to the survey, which monitors the favorability of China and the U.S. among adults in 41 countries, China’s global favorability has witnessed a substantial increase. Reaching a net favorability score of 8.8 by the end of May, this rise in positive sentiment toward China appears to be particularly noticeable after March, and it further escalated following the announcement of the ‘Liberation Day’ tariffs by former US President Donald Trump.
US Favorability Dips into Negative
Simultaneously, the United States finds itself in an unfavorable position. After announcing a so-called ‘reciprocal tariff’ on April 2, the U.S. global net favorability dropped to a negative value for the first time since January 2022. Despite a brief uplift in early May, when the Trump administration agreed to temporarily reduce tariffs on China, the situation soon became precarious once again, with unfounded accusations against China threatening to destabilize the fragile calm.
Impact on Investment Opportunities and Risks
Jason McMan, the Political Intelligence Director of the consulting firm, suggests that these shifts in global favorability could potentially reshape the landscape for investment opportunities and risks. As the favorability of the United States declines, American firms may face reduced trade and investment chances overseas. This could lead to consumers avoiding products and job opportunities offered by U.S. companies.
This shift further emphasizes the need for investors to carefully evaluate the bonds they hold and consider reassessing their portfolios to navigate through the turbulent times ahead. For instance, it might be prudent to start considering investments in markets that are becoming more favorable, like China, while cautiously reducing exposure to potentially higher-risk markets like the U.S.
However, it’s essential to remember that the current economic climate is highly volatile, and sudden policy shifts can drastically change the investment landscape. Therefore, investors should regularly conduct thorough risk assessments and stay informed about the latest economic and political developments.
