Peter Navarro urged Europe and other Western governments to tighten measures against Chinese automakers, arguing in Politico Europe that Chinese groups are making aggressive overseas gains while Western responses remain weak. He said the US is the only major auto market that has kept BYD out, yet warned the company is pressing at US borders. Navarro described an industrial contest with Beijing, and said existing tariffs and policies have failed to halt Chinese brand expansion in Europe, while legacy manufacturers such as Volkswagen and BMW have cut jobs and reduced earnings guidance.<\/p>\n
The note said earnings are constructive, with US banks and TSMC supporting the core AI-led growth cycle through resilient capital-markets activity, stable client demand and strong AI-linked semiconductor demand. It added that value opportunities remain but are harder to secure cheaply as positioning becomes crowded and premium valuations spread, with FX carry still working and earnings underpinning the cycle. At the same time, geopolitical risks were described as underpriced, speculative leverage is drawing policy attention, and the best-performing assets are already trading at a premium.<\/p>\n
We must prepare for increased volatility in European automotive equities as trade tensions between the West and China escalate. With the STOXX Europe 600 Auto Index historically sensitive to Chinese market shifts, we recommend buying out-of-the-money put options on legacy European automakers. This strategy protects our portfolios against sudden tariff shocks, especially as Chinese EV exports to Europe continue to challenge local manufacturers.<\/p>\n
While tech giants like TSMC validate the AI-led cycle with strong revenue growth projections of over 20%, the cost of entry for these crowded stocks has become excessively high. Instead of purchasing expensive underlying shares, we should utilize bull call spreads on major semiconductor ETFs. This limits our premium risk while still allowing us to capture any continued upward momentum in the AI sector.<\/p>\n
Geopolitical risks are currently underpriced, with the VIX volatility index hovering near low levels of around 12 to 13 points. We see this as an ideal entry point to purchase cheap, long-dated VIX call options to hedge against sudden global supply chain disruptions. This affordable volatility insurance protects our broader portfolios if the trade war suddenly intensifies in the coming weeks.<\/p>\n\n\n\n