Investors need to avoid complacency and diversify investments if they want to avoid being stung by the rapidly advancing trade war, Nigel Green, founder and CEO of deVere Group, a leading independent international financial consultancy, has warned.
“There really hasn’t been any major asset class or any part of the world Trump hasn’t spoken out against in recent weeks. As such, if investors are serious about growing and safeguarding their wealth, complacency should no longer be an option. Vigilance is crucial,” he said.
The current climate of trade war rhetoric and increasing tariffs has caused mounting tension not only between the US and China, but increasingly other territories, including the EU.
In the latest casualty, motorcycle manufacturer Harley Davidson has announced it is moving some production out of the US in response to EU tariffs. These tariffs were themselves put in place in response to US tariffs on steel and aluminium.
This morning it also emerged that Trump plans to restrict Chinese investment in the US technology industry.
Trade war shakes global markets
While early trade war posturing had relatively little impact on stock markets, it is now beginning to bite. Markets fell sharply today, with Dow futures tumbling around 150 points.
“Up until now the markets have been remarkably nonchalant regarding the escalating tensions between the world’s two biggest economies over the last couple of months,” said Green.
“However, as the Trump administration sets out increasingly aggressive restrictions on what they see as China’s unfair trade practices, and because Trump is on the trade offensive on many fronts, including against traditional US allies, the worries are now becoming much more focused.”
The need to diversify investments
Green argues that investors need to be vigilant, and diversify investments to ensure they have a robust portfolio ahead of this financial storm.
“Now is the time for investors to ensure that their portfolios are properly diversified,” he said.
“As history teaches us, diversification is the best way an investor can position themselves to mitigate risks – and also, importantly, to benefit from the buying opportunities that all bouts of market volatility present.”
Trump’s negotiation strategies
Green agrees with the commonly proposed theory that this trade war is a particularly unorthodox negotiating strategy on Trump’s part. However, he believes there is still significant risk for market fallout.
“It is likely that Mr Trump’s bombastic tactics are just negotiating strategies and he will not totally overhaul and/or disrupt trade patterns,” he said.
“However, due to the scope and depth of the potential fall out of a US-led trade war on international trade and global growth, investors should be actively looking to review and, if necessary, rebalance their portfolios.
“Investors need to brace themselves for months of heightened posturing from the different parties, which is likely to increase market turbulence. And as Trump potentially marches off to a trade war, a good fund manager will help investors sidestep the risks and embrace potential opportunities.”