Tips to steel your portfolio against crossfire
Steven Downey, a chartered financial analyst candidate at Holborn Assets in Dubai, says the impact on your own investment portfolio will depend on whether this is a limited skirmish or evolves into a wider trade war that sucks in Canada, Mexico and Europe as well. “That would be negative for equities and trigger a flight to quality currencies and lower risk fixed income bonds.”
Mr Downey says you should check your portfolio has sufficient diversification including assets with low correlation to stock markets, such as bonds and gold. “As a general rule aim for 60 per cent in stocks and shares, 40 per cent in bonds, plus a sprinkling of alternative assets such as gold and cash.”
Vijay Valecha, chief market analyst at Century Financial Brokers in Dubai, suggests examining your portfolio for exposure to protected sectors. “Technology, transport and machinery and equipment manufacturing stocks have been targeted, and are showing much greater volatility as a result.”
US companies that earn huge revenues from China are in the crosshairs, including Apple, and chip manufacturers Intel, Skyworks Solutions, Qualcomm Applied Materials and Qorvo. “They rely heavily on cheap Chinese manufacturing to keep costs low, so it is a no-brainer to hedge or reduce your exposure to these sectors.”
You should also be wary of any exposure to US agricultural exports such as soybeans, he adds.
Mr Valecha says it could make sense to invest in companies with higher US domestic sales, suggesting real estate and railways operation CSX Corporation, retail pharmacy and health care company CVS Health, multinational telecoms conglomerate Verizon Wireless and variety store chain Dollar General.
In an interconnected world, tariff threats can ripple across almost every sector, he adds. “The best advice is to be cautious, invest in precious metals and safe haven currencies, and allow time for choppy markets to price in the news.”
Recent stock market tips make a tempting buying opportunity, especially if you are looking to invest for the long term, at least five or 10 years, when Mr Trump will have left the world stage.
John Viney, chief operating officer at wealth advisers AES International in Dubai, says investors should look to the long-term and stay invested through a balance spread of low-cost passive investment vehicles such as exchange-traded funds. “Long-term investing is meant to be boring, like watching the grass grow.” A trade war makes for exciting headlines, and plenty of shortterm volatility. The best advice is to keep your head down and wait until peace breaks out.