Investors are pausing longer U.S. exposures due to fiscal concerns: PWC

• The U.S. trade deficit, particularly in goods, remains a significant concern, despite a surplus in services (e.g., AI exports).
• Tariffs, while not yet broadly inflationary due to disinflationary forces like declining shelter costs and stable energy prices, are starting to be passed on to consumers in specific sectors.
• Geopolitical risks, such as potential disruptions in the Strait of Hormuz, could lead to a sustained spike in crude oil prices, complicating central bank efforts to manage inflation.
• Fiscal deficits in the U.S. are a growing concern, potentially leading investors to pause longer-term allocations to the U.S.

The analysis discusses the complexities of global trade, highlighting the U.S. trade deficit and the impact of tariffs. While disinflationary forces have mitigated tariff-driven inflation so far, concerns about fiscal deficits and potential oil price spikes from geopolitical events could lead investors to reduce long-term U.S. exposures.