Wealth strategist advises multi-asset portfolio amid trade tensions

Global advisor eyes two scenarios for global markets

Wealth strategist advises multi-asset portfolio amid trade tensions
Steve Randall

Current uncertainty in the global markets make a diversified asset portfolio vital for investors according to a global wealth strategist.

Tom Elliot, international investment strategist at financial advisory firm deVere, says that with escalating trade tensions, a ‘knife-edge’ for Brexit, and a looming shift in global markets, investors need to position themselves well.

“A lot of disruption that be inflicted on the global economy and capital markets should a full trade war develop between the U.S. and the rest of the world,” warns Elliot.

He adds that this scenario would mean broken supply chains, input price rises, and reduced access to overseas markets.

“Manufacturing plants will have to be relocated, which would require companies to allocate capital for the cost of closing old plants and opening new ones,” he says.

Chinese stocks are already impacted by the tensions and this could spread to other regions.

“The 23% fall in the Chinese CSI300 index – which tracks the country’s 300 biggest companies – perhaps gives a glimpse of what Western stock markets can expect should this future come to pass,” Elliot says.

But there is a flip side
Despite the gloomy outlook, Elliot says that there are positives.

“On the plus side, the U.S. economy appears to be in an enviable position of relatively strong GDP growth, with estimates forecasting a 2.8% growth margin this year. Increased revenues are driving corporate profit growth and not cost-cutting tactics – another strong indicator. In addition, the market data company FactSet is predicting an average S&P500 second quarter earnings growth to be in the region of 20 per cent year-on-year,” he says. 

Elliot is also forecasting a ‘soft’ Brexit for the UK. That would mean some degree of access to the EU market in return for several conditions. Although the UK’s governing party is in disarray currently as politicians argue over the detail, Elliot thinks a deal will be agreed but it may exclude a free trade deal between the UK and US.

All things considered, the strategist says that investors should mitigate their risk: “a protective, all-encompassing, multi-asset fund is a safer bet that offers some protection against any market upsets – not least because it will contain a mixture of negative or low-correlated assets.”