Equities: Trade tensions and value challenge – BNY

“BNY’s Geoff Yu says tougher Western action against Chinese automakers could add pressure on Europe’s legacy manufacturers. U.S. bank and TSMC earnings validate the AI-led growth cycle, but crowded positioning, premium valuations and underpriced geopolitical risks limit the appeal of European equities.”

Chinese autos and crowded growth

"White House senior trade adviser Peter Navarro has called on Europe and other western governments to take tougher action against Chinese automakers, arguing in a Politico Europe commentary that Chinese firms are making aggressive gains abroad while the West responds too weakly. He said the U.S. remains the only major auto market that has kept BYD out, but warned that the company is pressing at U.S. borders."

"Navarro framed the issue as an industrial contest with Beijing, saying current tariffs and policies have not stopped Chinese brands from expanding in Europe, even as legacy carmakers including Volkswagen and BMW have cut jobs and trimmed earnings guidance."

"Earnings are constructive. U.S. banks and TSMC confirm that the core AI-led growth story remains intact, with resilient capital markets activity, stable client demand and strong AI-linked semiconductor demand. This is not a market built only on hope."

"Value has not disappeared, but verified growth is getting harder to buy cheaply. Warren Buffett’s point about “everybody gambling” is simple: when too many investors are chasing risk, genuine bargains become harder to find. That tallies with the current setup: the strongest growth engines are still delivering, but the cost of owning them has risen."

"Growth is being verified, FX carry is working and earnings are supporting the cycle. On the flipside, geopolitical risks are underpriced, speculative leverage is drawing policy attention and the best assets are already trading at a premium."