Are there any investment opportunities following the introduction of higher tariffs?

The recent sharp sell-off in equities, triggered by the introduction of President Donald Trump's tariffs and the ongoing trade war between the US and China, has impacted investors worldwide. This has raised concerns among investors about the wisdom of sticking to their current financial strategies. 

Some, for example, are contemplating whether to remain invested in riskier assets or to shift towards more stable options with less exposure to market fluctuations. However, making sweeping changes to portfolios to mitigate risk and volatility would be the wrong approach. While the introduction of tariffs has indeed created significant volatility, it has also opened up new opportunities for investors.

1. Make sure your portfolio is properly diversified. Equities and bonds have gone through a lot of volatility, but that doesn’t mean that they should now be ignored. We believe in the strength of a diversified portfolio. A balanced investment portfolio typically involves a combination of stocks, bonds and alternatives (such as gold) as well as cash.
2. Don’t avoid all risk. Don’t pull out of equities and bonds in favour of less risky assets as they could recover soon after they fall. For instance, when a 90-day reprieve from the enhanced tariffs for all countries (apart from China, Mexico and Canada) was announced by Trump, it resulted in a major market rally. Of course, there’s no guarantees that it will stay that way, but by not staying invested you could lose out on any recovery. Instead, talk to your investment manager and financial planner about any adjustments that could be made considering the current investment climate. For instance, investors seeking a more dedicated income might benefit from shorter-dated bonds, as they are less sensitive to interest rate adjustments. Shorter-term bonds with low duration can provide some stability in a volatile market.
3. Don’t try and time the market. The phrase ‘time in the market, not timing the market’ is a crucial mantra to heed in times of uncertainty. When it comes to the equity portion of your portfolio, avoid cutting out every sector experiencing difficulties, as these challenges may be temporary. Market conditions are changing frequently. If you sell all your tech stocks in the morning due to a drop in value, you might regret it if they recover by the evening.
4. Look at maintaining some US exposure but take advantage of the market broadening out. Completely avoiding US investments is impractical, especially as major US listed entities like the Magnificent Seven (Apple, Microsoft, Amazon, Google, Facebook, Tesla, and Nvidia) dominate the market. While these stocks have given many investors fruitful returns in recent years, we have witnessed a broadening out of markets more recently as investors take profits and seek opportunities in other jurisdictions (Europe and emerging markets).
5. Consider some exposure to commodities. Commodities like gold can provide protective opportunities in times of market uncertainty as they can offer a hedge against volatility.

Markets go up and down all the time and with investing there is always the risk of losing money. Ultimately, the key is not to make any drastic, sweeping or knee-jerk changes to your portfolio without consulting an expert. But talking through these strategies with your dedicated Evelyn Partners expert could offer more peace of mind on how we’re navigating through the challenges posed by tariffs. 

For more information on how you could potentially capitalise on new investment opportunities during times of uncertainty, book an appointment now.