Donald Trump, the U.S. president, said that U.S. Government Bonds are no longer serving as a safe asset due to the "tariff war" and that investment portfolios should be composed of traditional safe assets such as gold, German Government Bonds, and British Government Bonds.
On the 14th, Shinyoung Securities reported that the British research firm TS Lombard released a report containing this information. TS Lombard noted that President Trump is showing signs of retracting policies as pressure on the bond market grows, and if the dollar rebounds technically, this could paradoxically lead to large-scale dollar opportunities. While the dollar system won't collapse solely because of tariff policies, if the attractiveness of dollar assets diminishes due to real economic shocks, the transition to a multipolar currency system could accelerate, according to TS Lombard.
TS Lombard predicted that two conditions must be met for the dollar system to collapse. These are a compromise in the Federal Reserve's (Fed) policy independence and measures that limit foreign capital inflow under the so-called "Mar-a-Lago style policy." TS Lombard stated that the Trump administration's direct interference with the Fed is already underway and that recent high-level policy statements indicate a serious consideration of the Mar-a-Lago style policy.
In conclusion, TS Lombard explained that unless investors are seeking short-term revenue, investments in dollar assets including U.S. Government Bonds could be risky. TS Lombard said, "For most investors, the Trump administration has already crossed the 'Rubicon' and if it fully crosses the river, there is a high possibility of severe liquidity disruptions throughout the market."
TS Lombard stated that while the Japanese yen could be an alternative, there are still risk factors considering the structural vulnerabilities of the Japanese financial system. TS Lombard instead noted that "restructuring the portfolio with traditional safe assets such as gold, German Government Bonds, and British Government Bonds is advantageous," adding that "capital preservation is paramount at this time, and this should take precedence over revenue pursuits."