In this episode of Perspectives, Escala Chief Investment Officer, Tracey McNaughton, discusses the seismic shift in German defence spending, why Greek banks are looking attractive and why the team are no longer happy to be overweight US equities.

(1:10) Tracey for decades, Germany has been the poster child of fiscal conservatism in Europe. The country's approach was shaped by its post-WWII economic memory, where inflation and debt were deeply stigmatized. The past few weeks has seen a seismic shift in that view.

(1:55) It was a historic shift in Germany's fiscal policy.

(2:49) Still, it means some significant government spending in Germany. What does it say about NATO?

(3:51) So is this another cold War?

(4:27) The Australian Government bought down its budget last week. Did defence spending get a boost?

(5:21) Let's turn to trade policy—specifically tariffs. Today is Liberation Day – the day the Trump administration is expected to announce the most aggressive pivot in U.S. trade policy in decades. There's been a lot of headline noise, but break it down for us: how are U.S. companies actually being affected on the ground?

(6:15) That's massive. What are companies doing in response?

(7:49) So even "Made in America" isn't immune? The idea of a 100% "Made in America" car does not exist.

(9:19) What about everyday consumer brands?

(10:09) So inflation is coming back through the trade channel?

(10:30) What about smaller companies? How is all of this affecting them?

(11:47) So what are the smart companies doing right now?

(13:32) That's a pretty tough landscape. Are there sectors that are less affected by these tariffs -maybe even thriving?

(14:48) What are some other examples of more resilient sectors?

(15:38) So it is the defensive sectors plus financials and real assets that will likely be the most insulated – at least in a relative sense. The countries whose equity indexes are highest in these sectors are the UK, Europe and Australia.

(15:56) That brings us to an important decision that came out of our investment committee last week. You've announced the closure of your overweight position in US equities relative to Australian equities. Walk us through this decision?

(16:48) That sounds logical. So what changed?

(17:38) Tariff induced inflation pressures may prevent the US Federal Reserve cutting interest rates as much as expected. Further undermining the case for US equities.

(17:58) Tracey it's clear we're navigating a period of substantial global change. What advice would give to investors right now?