As tariffs continue to shape the global trade landscape, investors are searching for strategies to mitigate the economic impact. With the S&P 500 down by 7.7% since its peak in February, many anticipate more market volatility due to the heavier-than-expected tariffs under the Trump administration. Uncertainty over the potential escalation of tariffs is pushing investors to seek assets that can endure a recession and high inflation, as well as companies that rely less on international trade.
In response to this new economic reality, experts are recommending a cautious approach to investing. Don Calcagni, chief investment officer at Mercer Advisors, emphasizes the importance of diversification and avoiding high-risk, headline-sensitive assets. He advocates for a focus on private markets and safer trades such as commodities, precious metals, and defensive stocks, which could offer protection against the risks of tariffs and potential recession.
Small-cap companies, which are less reliant on international trade, are also seen as attractive investment options. Gustaf Little, a senior portfolio manager at Allspring, is increasing his positions in these firms, anticipating that they may benefit from protectionist policies. Additionally, hedge fund investors like Robert Christian of Franklin Templeton favor global macro and neutral equity funds that can perform well during uncertain times.
Despite these protective strategies, many experts, including Adam Hetts from Janus Henderson Investors, remain cautious about the long-term impact of tariffs. While markets have adjusted to the current levels, the question remains whether these protectionist policies will erode business and consumer confidence, fueling inflation, and possibly triggering a recession or stagflation in the U.S.
Source: Reuters