These are hot investments that professional stock pickers are buying NOW to profit from Trump’s trade tariff wars - as revealed to money guru JEFF PRESTRIDGE
What a worrying time for those with share portfolios, equity Isas and pension funds dependent on the performance of the stock market to secure them a financially resilient retirement.
Although the sharp stock market falls that we have seen since President Trump imposed tariffs on goods exported to the United States do not match those seen in previous financial crises – such as the banking meltdown of 2008 and the global lockdown of 2020 – we are not yet out of the danger zone.
While some markets yesterday – such as Hong Kong, China, and the UK – recovered a chunk of the losses that they incurred on Ugly Monday (Hong Kong’s 13.2 per cent fall was its biggest since the Asian financial crisis of 1997), we are far from being clear of the eye of the storm.
Markets in Taiwan, Indonesia and Thailand continued falling on Tuesday – and further stock market turbulence is expected in the coming weeks as the world adjusts to the deglobalisation impact of Trump’s protectionist tariffs.
All rather scary. A number of key financial commentators are now openly talking about recession in the US (Jamie Dimon, boss of US bank JPMorgan Chase), a world economic nuclear winter (Bill Ackman, a US hedge fund manager and Trump supporter), and further stock market falls.
Larry Fink, boss of global asset manager BlackRock, says markets could fall by another 20 per cent from here.
Tariffs: Uncertainty, market volatility and negative sentiment are back in spades and there seems little light at the end of the tunnel that President Trump (pictured) has pushed us down
All deeply troubling for investors. Uncertainty, market volatility and negative sentiment are back in spades and there seems little light at the end of the tunnel that the President has pushed us down.
Caroline Shaw, multi-asset portfolio manager at Fidelity International, took to the airwaves yesterday to talk about the ‘seismic economic event’ that Trump has created off his own bat.
Worrying times, she said, but not without opportunities for brave investors – a view shared by some of the investment experts that Money Mail has spoken to in the past 24 hours...
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First, remember the basic rules...
Although the recent correction in stock markets is unnerving for investors, the biggest mistake now would be to sell your shares and funds in a panic, especially if you bought them for the long-term (which you should always do).
As Nigel Green, chief executive of the financial advisory deVere Group, says: ‘Savvy investors understand that volatility is part of the price you pay for superior long terms.’
He adds: ‘Those who stay invested and act strategically during times like these are consistently the ones who reap the biggest rewards. Recoveries often begin when sentiment is still deeply negative.’
So, avoid the temptation to sell your shares and run for the hills.
Yes, I’ve said it before (apologies), but if your mission is to build long-term wealth it is better to be in the market (invested) rather than in and out of it.
Alan Miller, chief investment officer of wealth manager SCM Direct, is currently no big fan of the top end of the US stock market – ‘overvalued’ – but he does say that investment stayers do better than those who flit in and out of the market.
For example, in the 2010s, an investor with a holding in the S&P 500 Index (the largest listed companies in the US) would have generated a return of 190 per cent over the course of the decade.
But if they had missed the market’s best ten days, their return would have halved – to 95 per cent.
So, if you’re investing on a regular basis – into a pension or an equity Isa – keep going.
Not only will you be buying shares or funds that are cheaper now than they were a month ago, but you will be utilising invaluable tax breaks.
In the case of a pension, you will get tax relief on contributions (worth a minimum 20 per cent), plus the bonus of an employer payment top-up if you are in a workplace pension.
These are just too good to miss. Plus, your money is more likely than not going into a default fund that is split across a range of assets – not just equities – giving you a degree of protection from sliding equity prices.
For Isas, making as much use as possible of the annual £20,000 contribution allowance gives you the chance to build your own mini tax haven – where tax is not an issue (on investment growth within or on any withdrawals).
...and consider these strategies:
Over the past 24 hours, Money Mail has asked a plethora of wealth managers about how investors can ensure their portfolios are best set up to withstand the fallout from Trump’s protectionism – and thrive long term.
Although their views vary, as is the way with investing, the following are the dominant themes that come through.
1. Spread risk
Diversification is all-important. You can no longer rely upon the US stock market – and in particular the magnificent seven stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) – to power your investment portfolio.
Matthew Yeates, deputy chief investment officer of Seven Investment Management (7IM), says: ‘The last decade has been one of US exceptionalism: US assets or nothing.
In many ways, Trump’s Liberation Day tariff plan put a stop to that – and the relative outperformance of US equities.’
He adds: ‘If tariffs are about looking inward, we expect investors to look outwards. In an uncertain new world, investors should seek greater diversification – equity exposures and asset types – to navigate a more volatile environment.’
Further stock market turbulence is expected in the coming weeks as the world adjusts to the deglobalisation impact of Trump’s protectionist tariffs
It’s a view shared by Ben Conway, chief investment manager of Hawksmoor Investment Management, and Tom Stevenson, investment director at Fidelity International.
‘Portfolios should always be diversified across geographies and asset classes,’ says Mr Conway. ‘It might now be prudent to consider rebalancing in the wake of recent market volatility.
‘That means doing the opposite to what might feel comfortable: increasing your “losers” and decreasing your “winners” to bring your portfolio in line with weights that give you adequate diversification.’
Mr Stevenson adds: ‘Three months ago, Goldman Sachs asked investors what they thought about the new US government’s policies.
More than 50 per cent said they would be good for the US and bad for the rest of the world. Just 2 per cent expected the reverse. It really is a great advert for diversification.
Even when we know what is happening, we often don’t fully understand what the implications will be or who will end up winning and losing.’
Many global funds are heavily invested in magnificent seven stocks. ‘They’re not really global,’ says Mr Miller.
‘They’re US, plus a bit.’ You can check out their portfolios by looking at the latest monthly factsheet, which will detail the biggest holdings and geographic exposure.
If the magnificent seven dominate, consider taking some profits and investing the proceeds elsewhere.
Mr Miller warns that the magnificent seven stocks now make up a fifth of the MSCI World Index.
He describes the ‘valuation and concentration risks’ of these stocks as ‘palpable’.
A better strategy, he suggests, is to invest in a US fund that has an equal weighting in each of the companies that make up the S&P 500 (in other words, lighter touch exposure to the magnificent seven).
The likes of Invesco and iShares run such funds. Alternatively, he recommends small cap US funds or US funds with a dividend bent.
Rob Burdett, head of multi-asset portfolios at investment house Nedgroup, agrees, saying that US small caps ‘look good value from here and less sensitive to Trump’s tariffs’ than bigger US beasts such as Apple that import components from the likes of China.
2: Go for gold
Although the gold price has slipped in response to Trump’s tariffs, most fund managers believe it remains an important portfolio diversifier.
Nedgroup’s Mr Burdett says gold often works well as a ‘buffer’ when fear strikes.
He explains: ‘The late Julian Baring, self-confessed gold bug and founding manager of what is now BlackRock Gold & General Fund, used to recommend that investors hold around 5 per cent of their portfolio in his fund.’
He adds: ‘If it grew to 10 per cent, he would advise that investors sell back to 5 per cent. If it dipped to 3 per cent, he would suggest topping it back up to 5 per cent.
‘Not a bad strategy when it comes to any investment, but especially so for the inert but erratically priced metal that is gold.’
While some markets recovered a chunk of the losses that they incurred on Ugly Monday, we are far from being clear of the eye of the storm
3: Think UK
While the economic mood music in the UK is more down than upbeat, some fund managers now believe the UK stock market looks attractive.
‘It offers strong income by way of dividends,’ says Mr Miller, ‘and it sits at a big 40 pc discount to global peers. In other words, it’s cheap.’
It’s a view shared by other fund managers that Money Mail has spoken to. Ben Peters runs the £1.7 billion Evenlode Global Income Fund, and UK-listed businesses represent just over a fifth of the portfolio’s assets.
‘We see a good number of opportunities in the UK,’ he says. ‘Market leading businesses that generate strong cash flows and attractive returns on capital – which lead to growing dividends.’
Three of the fund’s top holdings are UK listed: Unilever, Reckitt Benckiser, and Experian.
Mr Conway agrees: ‘UK equities, especially smaller companies, look attractively valued.’
UK funds that Hawksmoor like include Aberforth Smaller Companies, Artemis Select, Temple Bar and Teviot UK Smaller Companies.
4: Remember Japan
River Global is among a number of investment houses that sees rich opportunities from Japanese equities.
William Lough, portfolio manager, says: ‘Japan is home to many companies which dominate their particular market, however niche, allowing them to earn attractive margins.
‘With corporate governance at the top of the agenda, we are seeing more cash returned to shareholders by way of dividends.
‘On the horizon is increased merger and acquisitions. For investors with a long-term perspective, valuations look particularly attractive – especially after the tariff carnage of the last few days.’
Indeed, Japan could be the first country to strike a deal on tariffs with President Trump.
And finally...
The last word goes to Hawksmoor’s Mr Conway, who says: ‘The key to successful investing is having an investment portfolio that can weather all types of macro-economic conditions.
‘It means that when curve balls like tariffs come along, there will always be something in the portfolio to counter any adverse impact on other assets.’
Well said, that man.
Diversify and diversify again – and keep investing into your Isa and pension.
jeff.prestridge@dailymail.co.uk
