Be careful what you wish for

Henry Jennings | Marcus Today

We’re only a few weeks into Trump 2.0, and things are already moving at warp speed. From Day One, his Sharpie of Chaos has been busy. The latest presidential decree? Tariffs on Canada and Mexico—because nothing says "Make America Great Again" like making quesadillas and maple syrup more expensive. These are big U.S. trading partners, deeply embedded in the supply chain, so naturally, the fallout has been immediate and brutal.

Japanese carmakers? Pummelled. Many of them build cars in Mexico and sell them into the U.S. The USD has surged, which is probably not what Trump wanted, but hey, unintended consequences are kind of his thing. Even he admitted that consumers will feel ‘some pain’—which is ironic, considering they voted for prosperity, not an economic kidney punch. The Fed saw this coming and wisely decided to keep its options open. When the ground keeps shifting under you, it’s hard to focus on the future—you’re just trying not to eat sand.

The Billion-Dollar Question

For investors, the key question is: Is this just another Trump negotiation tactic, or is he trying to solve the U.S. debt crisis with tariffs? He has, after all, said that the most beautiful word in the English language is ‘tariffs’. I Googled it—not on the list. ‘Ethereal,’ ‘serendipity,’ ‘halcyon,’ ‘incandescent’—but no tariffs. I suspect the governments of Mexico and Canada might go with ‘incensed’ instead.

And if this is how Trump treats his friends, what happens to his enemies? So far, China has only copped another 10% in tariffs—which, in Trump terms, is practically a big man hug.

How Will Australia Fare?

Luckily, Australia might dodge this tariff tornado since our trade balance with the U.S. is actually in Trump’s favour (a miracle in itself). But that doesn’t mean we’re in the clear.  U.S.-exposed stocks could take a hit: USD earners could be winners.

• James Hardie (JHX)—A U.S. slowdown + higher interest rates = building activity hits a wall.
• Cettire (CTT)—Many of its imports previously dodged tariffs under the $800 rule, which is now abolished. Ouch!
• RIO—Has aluminium exposure, so it’s in the splash zone.
• Lynas (LYC)—Could actually benefit, if China retaliates by restricting rare earth exports, driving up prices.
• Lovisa (LOV)—Recent downgrades already hurt; now, add a weakened U.S. consumer and a ‘Made in China’ supply chain.
• Fisher & Paykel (FPH)—Already warned about margin hits from tariffs. Many of its products are made in Mexico.
• ResMed (RMD)—Oddly enough, a winner in this mess, since it manufactures in the U.S.

Record high markets – Caution required

Of course, tariffs aren’t the only worry—reporting season is upon us. I like to call it ‘The Killing Season’, because the market takes no prisoners. Any disappointment is punished instantly, with verdicts being delivered at high-frequency-trading speeds. Sometimes, analysts take a second look and reverse the early moves, but by then, algos have already executed their version of a public stoning.

Even if a company has already updated the market during AGM or confession season, the outlook will be the real test. And this year, with Trump’s unpredictability, plus an Aussie election, things are looking extra spicy.

I’ve been scanning updates for clues. ‘Reaffirm’ seems to be the magic word popping up in the quarterlies. That’s a good sign, but is it enough to keep the market floating? Enough to justify record highs? I doubt it.

The CBA Bubble

A big driver of the ASX 200 rally has been the banks, but let’s be real—they’re not growth stocks. Maybe they’re priced like tech darlings, but the reality? Different story. Passive fund and ETF buying has pumped valuations beyond logic.

Case in point: CBA is trading at a price-to-book ratio of 3.5. In the U.S., money-centre banks are around 1.3. Even JPMorgan—arguably the best-run bank in the world—is only at 2.3.

The One Report to Rule Them All

If there’s one company report that will have everyone’s attention, it’s CBA—the biggest, most-watched stock in Australia. Results drop February 12.

Consensus expects:

• Earnings: ~303c per share
• Cash earnings driven by home loan growth
• Dividend yield: 3.15% (based on last year’s numbers)

Gone are the days of gloriously fat bank yields—those are now as extinct as a polite political debate on Twitter.

How to Survive Reporting Season

The only 100% risk-free way to play this? Sell everything and sit back with your popcorn. But since that’s not exactly practical (hello, taxes), the next best move is to review your portfolio.

• Check company updates.
• Think about how global uncertainty affects your holdings.
• Look for companies with strong business models, solid balance sheets, and minimal exposure to tariff wars.
• Avoid businesses clinging to ‘AI diversification’ or ‘tax strategies.’ (Translation: dodgy accounting or empire-building fantasies.)
• Be careful of empire builders with CEOs with big egos!
• Ask yourself—why do I even own this stock?

Brace for Volatility

Tariffs are enough of a headwind. Add earnings season to the mix, and you get a market that’s as calm as a two-year-old after five Red Bulls. Or a couple of Babycinos!

February will be wild. You can embrace it. Or ignore it. Either way, strap in.

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