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Yahoo
4 days ago
- Business
- Yahoo
4 Ways To Protect Your Portfolio If Trade Wars Lead to Recession
The U.S. economy faced an 'elevated' risk of recession due to President Donald Trump's tariff plans, but J.P. Morgan recently reduced that risk to 40% due to the decreased tariffs on Chinese imports. Still, Joseph Lupton, a global economist at J.P. Morgan, said to 'expect material headwinds to keep growth weak through the rest of this year.' Read More: For You: J.P. Morgan CEO Jamie Dimon also raised the risk of stagflation in an interview on Bloomberg TV in late May. Stagflation happens when the economy exhibits high inflation and slow or negative growth, plus high unemployment rates. If trade wars do lead to a recession or stagflation, financial experts recommend taking these four steps to protect your portfolio. Diversification isn't just about keeping a balanced portfolio of stocks, bonds and other assets — it's also about gravitating toward assets that provide stability in an uncertain environment. The experts at Fidelity Wealth Management recommend investing 'defensively,' so you'll experience 'shallower dips' in your portfolio when the broader markets are declining. This could mean putting more money into U.S. Treasury bonds, Treasury Inflation-Protected Securities (TIPS) or alternative asset classes, such as hedge funds and derivatives. Find Out: One of the best ways to recession-proof your portfolio is to 'shore up your cash reserves,' according to Charles Schwab. Failing to do so means you could be forced to sell stocks during a market decline and face extensive losses. For non-retirees, Schwab recommended setting aside three to six months' worth of living expenses in safe places like interest-bearing checking accounts, money market savings accounts, money market funds and short-term CDs. Cash reserves for retirees should cover two to four years' worth of expenses. It's easy to let emotions such as fear or greed guide your investment decisions during periods of economic and market volatility. But that's the last thing you want to do, because it usually means you get away from the investment principles that helped you build wealth in the first place. 'We've seen lots of evidence that when people experience significant volatility in the markets, they may become emotional and abandon their financial plan,' Scott McAdam, an institutional portfolio manager with Strategic Advisers, told Fidelity. Anthony Grosso, a New York-based financial strategist and mortgage loan originator, recommended focusing on areas of opportunity, whether it means buying quality stocks at bargain prices or finding investments that do well during periods of economic stress. 'The number one thing you want to focus on is mindset,' Grosso said. 'You don't go back to the same horse that's showing weakness. You look elsewhere, even if it's just a small percentage, because every cycle turns.' In addition to adjusting your stock investments, Charles Schwab recommended moving some of your money into the following assets during a recession: Fundamental index funds: These funds 'favor value' because they're weighted toward fundamentals such as adjusted revenue, dividend yields and earnings. Longer-maturity bonds: Investing in longer-maturity bonds is a good idea when interest rates rise, because you can lock in current high rates before they fall. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates Surprising Items People Are Stocking Up On Before Tariff Pains Hit: Is It Smart? Mark Cuban Says Trump's Executive Order To Lower Medication Costs Has a 'Real Shot' -- Here's Why This article originally appeared on 4 Ways To Protect Your Portfolio If Trade Wars Lead to Recession Sign in to access your portfolio
Yahoo
7 days ago
- Business
- Yahoo
Flanks: Core holdings with lasting value
Álvaro Morales, chief strategy officer and co-founder at Flanks, draws from decades in global private banking to reflect on the timeless role of traditional assets in portfolio construction. He explains how equities, bonds, and cash continue to be at the core of wealth management despite innovation reshaping the instruments around them in a discussion that crosses the boundaries of technology and investment philosophy. Amid the hype surrounding tokenisation and decentralised finance, Morales brings a more grounded perspective: traditional assets like equities, bonds, and cash still hold enduring value. They remain, in his words, 'the backbone of diversification in a typical modern portfolio and I don't see this changing any time soon.' Morales sees firsthand how technology is reshaping wealth management. But even amid this digital transformation, he argues for a balanced perspective: 'Global high-net-worth investors usually hold roughly one-fifth in equities, one-fifth in bonds, and one-fifth in cash,' he explains. The remaining 40% which now includes real estate, private equity, gold, and crypto adds an additional layer of diversification, but does not displace the core. The role of innovation, Morales believes, is not to replace these foundational elements but to improve how they are accessed, analysed, and managed. 'Innovation should enhance the core, not replace it,' he notes. He points to Europe's 64 million open-banking users, a number that has quadrupled since 2020 as a sign of this transformation. Flanks taps into this trend by enabling real-time access to balance sheet data across institutions. 'Technology compresses back-office costs by roughly 30%, and managers can redeploy those savings to improve client returns,' Morales says. In his view, this is where innovation creates real value, not in the invention of new asset classes, but in making existing ones more transparent, efficient, and actionable. Even traditional assets carry hidden risks. Morales points to 2022 as a wake-up call: 'Treasuries fell 13% after a 200-basis-point rate spike their worst year on record yet many investors still do not grasp why their bond portfolios declined.' Duration risk, he emphasises, remains misunderstood. Another emerging issue is concentration. 'Index funds now hold more than half of US long-term fund assets,' Morales warns. 'Liquidity could evaporate, and a sudden exit could overwhelm the market.' In other words, simplicity has its own dangers. With interest rates rising after years of near-zero yields, fixed income is regaining its allure. 'Carry has returned,' Morales says. 'A 10-year Treasury yielding about 4.5% provides enough coupon to cushion moderate rate moves.' For today's investor, the question is no longer whether to hold bonds, but where on the yield curve to position. He recommends tools like floating-rate notes and TIPS (Treasury Inflation-Protected Securities) to better manage interest-rate and inflation risk. The pandemic era served as a critical stress test for portfolio resilience. Morales believes investors have learned three fundamental lessons: 'Keep a liquid shock absorber, favour quality over leverage, and diversify by risk drivers, not just by names.' In equities, this means blending resilient dividend payers with growth companies. In bonds, pairing short-duration investment-grade credit with inflation-linked or floating-rate paper. 'Hold some cash, T-bills, or gold - assets that can be tapped when liquidity evaporates and rebalance opportunistically around volatility spikes,' he advises. Having worked across jurisdictions as diverse as the US, UK, and Latin America, Morales sees regulation not as a constraint but as a variable to manage strategically. 'Regulation shapes wrappers, not assets,' he says. 'The same corporate bond ladder might be packaged as a UCITS ETF in Europe, a 40-Act fund in the US, or a Cayman note for Latin-American families.' Firms that use technology to streamline compliance, he adds, gain a competitive edge. 'Reducing onboarding time from weeks to days is a real advantage,' Morales notes. As Chairman of the Risk and Audit Committees at Banesco USA, Morales underlines a disciplined approach to risk. 'Effective risk management relies on the first, second, and third lines of defence,' he says. 'After decades in banking, I respect risk even when it is not apparent. Risk never sleeps.' Governance is key: 'An empowered risk committee with veto power, strict rebalancing bands of ±5%, and quarterly scenario drills with external experts, those are the most important things to put in place.' Morales also reflects on his experience managing traditional asset strategies globally, including at Santander Private Banking. 'Wrappers vary with tax regimes, but the underlying assets remain the same,' he says. 'US investors gravitate toward domestic equities, UK clients pursue broad geographic diversification while retaining a home bias, and Latin-American investors prefer higher-yield sovereign and corporate bonds.' Private banks today may offer similar products, but Morales believes execution separates the best from the rest. 'Service quality, execution speed, and after-tax alpha are decisive,' he states. With data aggregation and workflow automation, firms can streamline manual tasks by up to 70% freeing advisers to focus on strategy. 'That's a big differentiator today, as the next generation of clients demands both personalisation and an 'online banking like' experience.' By consolidating data across global institutions, the platform provides clients and advisers with a 'unified 360° view' of assets and liabilities. 'This T+0 transparency allows cash drag, drift, and concentration to be flagged immediately,' Morales explains. 'Discussions shift from post-mortem reviews to real-time actions.' Flanks is also harnessing AI to do more than automate reporting. 'Our AI-powered data enrichment process gives advisors actionable insights that were previously impossible to gain when working with scattered Excel files,' says Morales. The result: better, faster decisions and potentially enhanced client returns. Morales offers pragmatic advice for future wealth managers: 'Liquidity is never free; 2022 showed that even safe-haven assets can tumble. Markets do not always rise, and black swans are real.' His approach favours process over prediction: 'Trust disciplined processes and sound knowledge over a guru's predictions. Design for the long term, execute in the short term, and monitor in real time.' Looking to the next decade, Morales remains confident in the dominance of traditional assets. 'They are pillars of the capitalist system, and I expect them to remain at or above 60% of diversified portfolios through 2040,' he says. While tokenisation may reshape infrastructure, 'equities and bonds will continue to provide the deepest, safest, and most regulated pools for income and growth.' Even in a landscape transformed by algorithms and APIs, Morales reminds us that solid fundamentals combined with smart technology remain the bedrock of enduring investment success. "Flanks: Core holdings with lasting value" was originally created and published by Private Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
Yahoo
01-05-2025
- Business
- Yahoo
Billionaire Ken Griffin Says Trump's Tariffs Have Made the U.S. "20% Poorer." Here's What You Can Do to Prevent Further Wealth Erosion.
GOP supporter Ken Griffin believes that Trump's tariffs have made the U.S. "20% poorer in four weeks." While Griffin's 20% figure is hard to substantiate, the issues he pointed out with the White House's trade policies are real. Investors can take several steps to protect their wealth, including buying international stocks and Treasury Inflation-Protected Securities (TIPS). Billionaire Ken Griffin is a major supporter of President Donald Trump and donated $100 million last year to conservative groups. However, Griffin isn't a fan of all the president's policies. He recently told Semafor's Gina Chon at the World Economy Summit that Trump's tariffs have made the U.S. "20% poorer in four weeks." Griffin has stated in the past that no brand compares to U.S. Treasuries. However, he believes the White House has "put that brand at risk." The hedge fund manager added, "It can be a lifetime to repair the damage that has been done." Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Griffin's comment about the U.S. being 20% poorer as a result of Trump's trade policies appears to reference the strength of the U.S. dollar relative to the euro. A weaker dollar can reduce consumers' buying power by making imported products and international travel more expensive. Tariffs can fuel inflation directly as importers pass their higher costs to American consumers. Retaliatory tariffs from other countries can hurt U.S. exporters and potentially lead to job losses in the impacted industries. Uncertainty created by trade wars can also reduce the global demand for U.S. Treasuries. This uncertainty can also cause the prices of many stocks to decline. But Griffin's 20% figure is suspect. The U.S. dollar has fallen around 10% relative to the euro this year, a steep decline that could negatively impact Americans' buying power in some ways. However, that's only half the number Griffin mentioned. The demand for U.S. Treasuries appears to have weakened somewhat, but not at an alarming rate. Also, while the S&P 500 (SNPINDEX: ^GSPC) (a good proxy for the overall stock market) is in correction territory, it has partially rebounded. Although Griffin's statement that the U.S. is "20% poorer" is hard to substantiate, tariffs have caused many Americans to be less wealthy than they were just a few months ago. If steep tariffs remain in effect, inflation could rise and reduce consumers' buying power even more. What can you do to prevent further wealth erosion? Here are four steps to take. Diversifying your portfolio, in general, is always a wise strategy. With the potential for further weakening of the U.S. dollar and lower demand for U.S. Treasuries, including international stocks in your investment portfolio could be a good move. A quick look at Vanguard's exchange-traded funds (ETFs) reveals that nine of the top 10 performers year to date are international funds. That's not surprising considering the global market dynamics caused by the Trump administration's trade policies. To protect your money against the corrosive effects of inflation, you might consider buying Treasury Inflation-Protected Securities (TIPS). If your principal invested in these Treasury securities goes up over time, you get the full increase adjusted for inflation. If the principal declines below the original amount invested, you still get the original amount. Precious metals tend to be good inflation hedges and can also rise during times of uncertainty. We've seen this happen so far in 2025 with the price of gold jumping while the stock market fell. Investing in precious metals could be a reasonable move for investors to take to prevent further erosion of their wealth. You could purchase physical gold or silver, including coins and jewelry. Another option is to invest in funds that own precious metals, such as the iShares Gold Trust. Or you could consider investing in a top gold miner such as Barrick Gold. Buying stocks that are likely to be highly resistant to the negative effects of tariffs could also be helpful. Many consumer staples stocks tend to be relatively tariff-resistant and hold up well during economic downturns. For example, The Coca-Cola Company is a blue chip stock that many investors find attractive during uncertain times as people keep buying soda even when times are tough. Utility stocks are another good alternative as power demand doesn't always dip with the economy. Dominion Energy, which provides electric power to Virginia, North Carolina, and South Carolina, is one utility stock to consider. It's also important for investors to stay alert to potential market dynamic changes. For example, the permanent lifting of tariffs or steep reductions in tariff rates by Trump could change things considerably. The assets that perform best during periods of uncertainty usually aren't the best ones to own when the uncertainty fades. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $282,457!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $40,288!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $610,327!* Right now, we're issuing 'Double Down' alerts for three incredible companies, available when you join , and there may not be another chance like this anytime soon.*Stock Advisor returns as of April 28, 2025 Keith Speights has positions in Dominion Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy. Billionaire Ken Griffin Says Trump's Tariffs Have Made the U.S. "20% Poorer." Here's What You Can Do to Prevent Further Wealth Erosion. was originally published by The Motley Fool
Zawya
22-04-2025
- Business
- Zawya
Investors fear Trump's attacks on Powell will pile on pain
Investors are fearful of a deep hit to asset prices if U.S. President Donald Trump attempts to fire Federal Reserve Chair Jerome Powell, undermining confidence in the central bank's ability to fight inflation and act independently. That could hurt the already bruised dollar, under-pressure equities and send bond yields higher, market participants said. The Fed's credibility as the world's most powerful central bank relies on its historic independence. Trump has criticized the Fed for not cutting interest rates quickly enough and if any subsequent chair were to be less inclined to raise rates when needed or to push for faster rate cuts, it could spur inflation. "Were Powell to be removed, markets would almost certainly interpret it as an inflationary signal, potentially driving long-term interest rates higher and undermining the U.S. dollar's role as the world's reserve currency," said Elliot Dornbusch, chief investment officer at CV Advisors. Following Powell's ousting, there would be "violent reactions in markets," according to Jamie Cox, managing partner at Harris Financial Group. "Monetary policy is not a political tool," he added. Some of the impact has already been seen in asset prices, with the dollar sliding to a three-year low on Monday, stocks selling off with the S&P 500 now roughly 16% below its February peak and benchmark U.S. Treasury yields up. Longer-dated U.S. Treasury yields rose on Monday. Removing Powell could exacerbate upward pressure on the so-called term premium - a measure of the compensation investors demand for the risk of holding long-dated bonds. Market inflation expectations, as measured by 10-year Treasury Inflation-Protected Securities and 10-year Treasuries, remained relatively stable on Monday. Trump said in a social media post on Thursday that the Fed chair's termination "cannot come fast enough," although his term ends in May 2026. White House economic adviser Kevin Hassett on Friday said Trump and his team were continuing to study if they could fire Powell, while Trump on Monday said the economy could slow down unless rates were lowered immediately. The White House declined further comment on Monday. LONGSHOT BEING PRICED IN Investors said that they were starting to take the possibility seriously of an attempt to fire Powell, despite the barriers to do so. It is unclear if Trump would be legally allowed to remove Powell, who is appointed by the president but confirmed by the Senate. Currently, however, an effort by Trump to oust members of other independent agencies is before the Supreme Court. Some said that they were starting to expect more longshot scenarios coming to fruition after the Trump administration's tariff policies were announced far harsher than expected, causing significant volatility in asset prices. Since the April 2 tariffs announcement, the S&P 500 has fallen 9%. "Previously I thought the odds were very much against Trump trying to remove Powell, but my confidence has faded," Christopher Hodge, chief U.S. economist at Natixis, said in a note following the president's comment. Such a move would likely hit asset prices widely, strategists said. Andrew Graham, managing partner of Jackson Square Capital, estimates that the S&P 500 index would fall below 4,835 - a roughly 6% fall from its Monday close. Jack Ablin, chief investment officer at Cresset Capital in Chicago, said if the president installs his own person at the Fed and the central bank lowers rates against a backdrop of rising inflation "we'd see a continuation of what we're experiencing now." "Unfortunately, both stocks and the dollar are overvalued, which gives them room to fall more in this environment," said Ablin, who thinks that the S&P 500 is 10% to 15% overvalued. Through Friday, the S&P 500 was trading at 19.2 times forward 12-month earnings estimates, compared with its long-term average of 15.8, according to LSEG Datastream. Brian Jacobsen, chief economist at Annex Wealth Management, said firing the head of the Fed would not "build confidence in the U.S. dollar.' Nate Garrison, chief investment officer, World Investment Advisors, praised Powell's track record at the Fed as being consistent and a steady hand. "Just the threat of removing him sends a bit of a shudder up people's spines,' said Garrison. REPLACEMENT TO POWELL Trump's outspoken criticism of Powell has a long history. In 2019, the president called the Fed chair "an enemy." But last year, following his election, he said he would not try to replace Powell. Powell himself has said he has no plans to vacate the job before his term ends in May of next year, while also arguing that the central bank would wait for more data on the economy's direction before changing interest rates, as tariffs could push inflation higher. Trump could replace Powell with former Fed Governor Kevin Warsh, the Wall Street Journal reported last week. Warsh for his part, however, has advised that the Fed chair should conclude his term, the report added. Warsh did not immediately respond to a Reuters request for comments. Capital Economics said if a well-qualified candidate is lined up, such as Warsh, then the initial market reaction "might not be disastrous" although it would likely be "the first step in dismantling the Fed's independence" as if it led to the remaining Fed board members being fired, that would "trigger a more severe market backlash." Some market participants consider an easier route for Trump would be to create a so-called shadow Fed chair, or someone investors would look to for guidance as opposed to Powell. However, that could also be viewed negatively by the market. "If it looks like we might have looser financial policy because we have a new Fed chair coming in, that would be a disaster," said Tom Bruce, macro investment strategist, Tanglewood Total Wealth Management. (Reporting by Carolina Mandl and Davide Barbuscia, in New York, additional reporting by Suzanne McGee, Lisa Pauline Mattackal, Saqib Iqbal Ahmed and Saeed Azhar; editing by Megan Davies and Marguerita Choy)
Yahoo
22-04-2025
- Business
- Yahoo
Analysis-Investors fear Trump's attacks on Powell will pile on pain
By Carolina Mandl and Davide Barbuscia NEW YORK (Reuters) -Investors are fearful of a deep hit to asset prices if U.S. President Donald Trump attempts to fire Federal Reserve Chair Jerome Powell, undermining confidence in the central bank's ability to fight inflation and act independently. That could hurt the already bruised dollar, under-pressure equities and send bond yields higher, market participants said. The Fed's credibility as the world's most powerful central bank relies on its historic independence. Trump has criticized the Fed for not cutting interest rates quickly enough and if any subsequent chair were to be less inclined to raise rates when needed or to push for faster rate cuts, it could spur inflation. "Were Powell to be removed, markets would almost certainly interpret it as an inflationary signal, potentially driving long-term interest rates higher and undermining the U.S. dollar's role as the world's reserve currency," said Elliot Dornbusch, chief investment officer at CV Advisors. Following Powell's ousting, there would be "violent reactions in markets," according to Jamie Cox, managing partner at Harris Financial Group. "Monetary policy is not a political tool," he added. Some of the impact has already been seen in asset prices, with the dollar sliding to a three-year low on Monday, stocks selling off with the S&P 500 now roughly 16% below its February peak and benchmark U.S. Treasury yields up. Longer-dated U.S. Treasury yields rose on Monday. Removing Powell could exacerbate upward pressure on the so-called term premium - a measure of the compensation investors demand for the risk of holding long-dated bonds. Market inflation expectations, as measured by 10-year Treasury Inflation-Protected Securities and 10-year Treasuries, remained relatively stable on Monday. Trump said in a social media post on Thursday that the Fed chair's termination "cannot come fast enough," although his term ends in May 2026. White House economic adviser Kevin Hassett on Friday said Trump and his team were continuing to study if they could fire Powell, while Trump on Monday said the economy could slow down unless rates were lowered immediately. The White House declined further comment on Monday. LONGSHOT BEING PRICED IN Investors said that they were starting to take the possibility seriously of an attempt to fire Powell, despite the barriers to do so. It is unclear if Trump would be legally allowed to remove Powell, who is appointed by the president but confirmed by the Senate. Currently, however, an effort by Trump to oust members of other independent agencies is before the Supreme Court. Some said that they were starting to expect more longshot scenarios coming to fruition after the Trump administration's tariff policies were announced far harsher than expected, causing significant volatility in asset prices. Since the April 2 tariffs announcement, the S&P 500 has fallen 9%. "Previously I thought the odds were very much against Trump trying to remove Powell, but my confidence has faded," Christopher Hodge, chief U.S. economist at Natixis, said in a note following the president's comment. Such a move would likely hit asset prices widely, strategists said. Andrew Graham, managing partner of Jackson Square Capital, estimates that the S&P 500 index would fall below 4,835 - a roughly 6% fall from its Monday close. Jack Ablin, chief investment officer at Cresset Capital in Chicago, said if the president installs his own person at the Fed and the central bank lowers rates against a backdrop of rising inflation "we'd see a continuation of what we're experiencing now." "Unfortunately, both stocks and the dollar are overvalued, which gives them room to fall more in this environment," said Ablin, who thinks that the S&P 500 is 10% to 15% overvalued. Through Friday, the S&P 500 was trading at 19.2 times forward 12-month earnings estimates, compared with its long-term average of 15.8, according to LSEG Datastream. Brian Jacobsen, chief economist at Annex Wealth Management, said firing the head of the Fed would not "build confidence in the U.S. dollar.' Nate Garrison, chief investment officer, World Investment Advisors, praised Powell's track record at the Fed as being consistent and a steady hand. "Just the threat of removing him sends a bit of a shudder up people's spines,' said Garrison. REPLACEMENT TO POWELL Trump's outspoken criticism of Powell has a long history. In 2019, the president called the Fed chair "an enemy." But last year, following his election, he said he would not try to replace Powell. Powell himself has said he has no plans to vacate the job before his term ends in May of next year, while also arguing that the central bank would wait for more data on the economy's direction before changing interest rates, as tariffs could push inflation higher. Trump could replace Powell with former Fed Governor Kevin Warsh, the Wall Street Journal reported last week. Warsh for his part, however, has advised that the Fed chair should conclude his term, the report added. Warsh did not immediately respond to a Reuters request for comments. Capital Economics said if a well-qualified candidate is lined up, such as Warsh, then the initial market reaction "might not be disastrous" although it would likely be "the first step in dismantling the Fed's independence" as if it led to the remaining Fed board members being fired, that would "trigger a more severe market backlash." Some market participants consider an easier route for Trump would be to create a so-called shadow Fed chair, or someone investors would look to for guidance as opposed to Powell. However, that could also be viewed negatively by the market. "If it looks like we might have looser financial policy because we have a new Fed chair coming in, that would be a disaster," said Tom Bruce, macro investment strategist, Tanglewood Total Wealth Management.
