Fund managers’ outlook on US investment returns has soured amid expectations that Donald Trump’s ‘reciprocal’ tariffs will be partially reintroduced when the 90-day pause expires in July, according to Quilter’s Investor Trends Survey.

It found that 80 per cent of fund managers believed the tariffs would be partially reintroduced, with 13 per cent anticipating they will largely be brought back.

However, none of the managers surveyed anticipated that they would be brought back in the same form as they were first introduced, and 7 per cent expected them to be dropped completely.

Looking at potential trade war implications, 74 per cent of asset managers agreed that it was somewhat likely or highly likely that the EU would retaliate.

On the other hand, almost all (93 per cent) believed that the UK would not retaliate to potential tariffs.

These expectations and negative sentiment towards the US is influencing investor expectations, with a third of respondents expecting the US to deliver less than 1 per cent of real GDP growth in 2025.

Meanwhile, the UK and Eurozone growth forecasts have also fallen slightly, but not to the same extent.

Fund managers anticipated this negative sentiment to translate into poorer returns for investors with exposure to US assets.

At the end of 2024, fund managers ‘overwhelmingly’ expected the US to be the best performer and the EU the worst.

However, in the latest survey, the US was predicted to see the worst returns, as voted for by 53 per cent of respondents, while the EU was expected to have the best returns, as voted for by 44 per cent of fund managers.

Just 6 per cent of fund managers anticipated UK assets to provide the best returns, down from 11 per cent at the end of 2024.

“Following a trade deal with the UK and the US and China relenting in their brinkmanship, the question on investor lips right now is ‘what happens after the 90-day pause on Trump’s reciprocal tariffs expires?’,” commented Quilter investment strategist, Lindsay James.

“President Trump has clearly been prepared, or forced, to listen to markets, and fund groups are expecting this will translate into a better programme of tariffs compared to 2 April. But he also will not want a repeat of his backtracking. As ever with the current US administration, the only certainty is uncertainty, and that in itself is not good for markets.

“It is not surprising, therefore, to see investor expectations for US equity returns and economic growth to be downgraded. White House polices have been pinpointed by fund groups as the cause for sentiment in the US to swing so dramatically in a negative direction.

“Whilst many have sought to tread carefully to avoid overt criticism of the recent policies, the investment community is in widespread agreement that the current approach is damaging on many fronts.

“Europe looks like it will continue to be the main beneficiary over the course of the year, despite strong performance already being driven by the shift in attitude to defence spending.

“US equities may have performed well in recent weeks, but this survey highlights that Europe stands to be the winner of the cautious outlook ahead.”

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