Where smart money is moving as Trump stings markets

The Trump administration is rattling markets daily, and it’s showing in the VIX index, which has surged to 23.51 - the highest level this year. For some investors, the volatility is starting to bite.

Timely, then, that Trilogy Funds hosted an event at the Radisson Blu Plaza in Sydney this week, drawing a crowd of high-net-worth investors and their advisers looking for stability in a world of wild market swings. 

Two presentations anchored the discussion:

• Dr Keith Suter, Managing Director of the Global Directions think tank - and Medal of the Order of Australia recipient - explored the implications of global conflicts and trade wars, explaining why Australia remains one of the safest and most attractive immigration and investment destinations.

• Henri Hines, Senior Portfolio Manager at Trilogy, unpacked how Australia's surging population and the retreat of traditional banks from development finance have created a win-win scenario: private lenders stepping up to fund essential construction projects while delivering stable returns.

Invitation: Livewire subscribers in Melbourne and Brisbane can register for upcoming free Trilogy roadshows.

Australia: An oasis in a world on edge

Increasing fragmentation of global trade, rising tariffs, and economic nationalism, particularly under the Trump administration, are reshaping supply chains and investment flows.

“The great fear I have is that we are heading back to a 1930s-style trade war,” Dr. Suter said.

Back in 1930, President Herbert Hoover approved tariffs on over 20,000 imported goods by signing the Smoot-Hawley Tariff Act.

As former U.S. International Trade Commission chief Alfred E. Eckes, Jr. explained in his book Opening America's Market, that move led to a vicious cycle of retaliation against the U.S. by its trading partners.

America's exports and imports collapsed by 67%, exacerbating the Great Depression and devastating the U.S. equity market. Those eerie parallels are reemerging now, with China, Mexico, and Canada promising or enacting tariffs on billions of dollars of American goods this month.

“If Trump follows through with his plans to impose blanket tariffs, we could see a significant slowdown in global trade. And history tells us that when trade slows, economies suffer,” Dr. Suter said.

But amid this uncertainty, Australia remains a standout. Our country’s relative economic and political stability, its geographic isolation, and its ability to control immigration are key advantages.

“Australia is in the most peaceful corner of the globe. We’re not dealing with territorial disputes, we have control over our borders, and we remain one of the most desirable destinations for skilled migration," he said.

This desirability is backed by hard numbers.

“The Australian High Commission in London receives more applications for migration than all other Commonwealth countries combined. More than Canada, New Zealand, and others put together. That is a vote of confidence in Australia’s future.”

With virtually unlimited demand to join the Lucky Country, the economic impact is clear: more people mean more demand for housing, which in turn will exacerbate Australia’s already significant housing shortage.

The private credit opportunity: A win-win for developers and investors

Enter private lending, where Trilogy Funds sees significant opportunities. Private credit has stepped in to fill the funding gap left by traditional banks, offering both a solution to Australia’s housing shortfall and a high-yield income opportunity for investors.

“We are not going to solve the housing crisis. However, we are doing our best to participate in the solution,” Hines said.

And the need for solutions is pressing. Federal government targets are falling well short, with an estimated annual shortfall of 60,000 dwellings. Meanwhile, affordability constraints continue to push buyers toward middle-ring suburbs and regional centres, creating significant opportunities for well-placed development projects.

“The partnership between property development and private credit will play a critical role in addressing Australia’s biggest housing crisis on record. It’s an opportunity to drive both financial returns and meaningful impact," he said.

“In places like Parramatta, Liverpool and Penrith, we’re seeing strong demand for urban infill developments. Similarly, regions like Newcastle, where the mayor recently announced a $3 billion investment to deliver 20,000 new homes, are attracting attention.”

Historically, such projects would have been bank-financed. But in recent years, regulatory constraints have made traditional lenders increasingly reluctant to fund property developments, particularly those with non-standard risk profiles. This has paved the way for private lenders, who offer more flexible and responsive capital solutions.

“The banks have pursued scale and efficiency. That means standardised underwriting processes that don’t always accommodate the bespoke nature of property development,” Hines said.

Private credit, on the other hand, offers a tailored approach that properly assesses a project’s unique risk profile and potential.

For investors, this translates into a compelling opportunity. Private credit investments typically offer higher yields than traditional fixed-income products, while also providing a level of security through collateralised loans.

For investors seeking higher yields than cash and bonds, but without the risk of Trump-exposed equities, private credit offers an "intelligent way up the yield curve", Hines said.

“We focus on capital preservation while optimising the annualised distribution rate. That’s why our portfolio has consistently outpaced inflation, even during periods of market stress.”

Who exactly is America friends with now?

Later in the evening, the discussion turned to some of the most pressing geopolitical risks that could shape the investment landscape over the coming years. One topic that loomed large was the changing of the world order and whether America’s friends will abandon it, or whether the U.S. will throw its own allies under the bus when they call for help.

One particularly contentious issue is Trump’s approach to sanctions and international diplomacy. It was noted that Trump has already signalled an intention to lift certain sanctions on Russia - a move that could strain relations with Europe and other allies.

“If the U.S. abandons its commitments to Ukraine, what does that signal to allies like Australia and the UK? Can we still rely on U.S. support if it’s willing to throw allies under the bus?” Dr. Suter asked.

The conversation also touched on tensions between the U.S. and China, highlighting the risk of someone snapping and unleashing weaponry in the heat of the moment.

"Neither side really wants to go to war, but there's always a risk of an accident," he said.