With the 90-day pause on tariffs set to expire on 8 July, the Australian Retirement Trust (ART) said it is ready to react to any surprises that unfold ahead of next week.
Speaking to InvestorDaily, ART head of investment strategy Andrew Fisher said the market had become “incredibly complacent” to the news of the pause on tariffs soon ending.
“In the lead-up to the last announcement, we felt the market was a little complacent then as well and that had some influence on our assumptions around the US and US earnings. That saw us adjust our valuations a little,” he said.
Fisher acknowledged that the end of the 90-day pause could potentially be an opportunity for negotiation and conciliation if the US shifts its approach from the previously combative tone taken by the Trump administration.
“It does feel as though the likelihood of an escalation is relatively limited because we are seeing some reasonably well-negotiated outcomes across a range of areas,” he said.
“[However], the one thing we’ve learned is that anything is possible. So I think we’ll go in with a healthy level of conservatism around any view we take and be ready to react so that we don’t get caught by surprise.”
Fisher explained that while the US remains ART’s largest allocation outside of Australia, it has maintained some restraint with respect to US.
“The US market has been priced for a level of perfection and exceptionalism that is almost unbelievable in the future,” Fisher said.
“[While] we think US exceptionalism will continue, the market has been priced for a more exceptional environment than what we can foresee.”
Fisher said the US has gone from being “expensive to slightly more expensive” as the risk premium for assets should be higher based on the level of volatility and uncertainty currently in that market.
While ART still has a sizeable allocation to the US, Fisher said ART has been marginally underweight towards the US for some time on the basis that it feels expensive.
The trust continues to invest in large index holdings in the US which act as a hedge for some of the more unpredictable elements of the US market such as the uncertainty around how AI will perform, Fisher said.
Fisher said while recent discussion about the removal of section 899 from the 'One Big Beautiful Bill Act' was a positive, particularly for Australian investors, the trust remained cautious.
"We've been taking a wait and see approach. Our public market assets are liquid and can be moved and so if we need to we could," he said.
"One the private side, I think we've been exercising an appropriate amount of caution with any long term commitments."
He noted that had section 899 gone ahead, it would have more significant impact on higher yielding asset classes.
"For example, property, private debt or private credit. That's where we were most circumspect with our allocations," he said.
"I don't know that we're going to rush straight back immediately. I think we'll wait to see exactly how the bill lands because you never know when you're going to get surprised by this administration."
