Easter gives one time to review your share portfolios. In last week’s Investors Chronicle John Rosier reviewed his portfolio and the impact of Trump tariffs. He has been “purging” US exposure from his funds portfolio. He has sold Polar Capital Technology (PCT) and JPMorgan Global Growth and Income (JGGI), both of which I hold, and several others. The exposure of Fundsmith Equity to US Stocks also proved unhelpful to his overall performance and mine.
With the S&P 500 down 10% in the last six months, is it time to refocus on other markets and dump US holdings? I am not so sure.
It has certainly been the case that buying the US markets has been a simplistic trading strategy in the last couple of years. You couldn’t go far wrong by investing in US companies or US index trackers. Tariffs will certainly have a negative impact on the US economy and several other countries. China should be particularly badly hit.
But has the world really changed? Famous investor Warren Buffett has said in the past “never bet against America” and he has proved right so far. The size and vibrancy of the US economy is not easy to beat and trade tariffs may only have a temporary impact. The US economy is so attractive to the best and brightest immigrants that it is like a lamp to a moth. That accounts for much of the success of the US technology sector in recent years.
It’s exceedingly difficult to predict what will happen to the world economy and changing portfolios based on short-term economic forecasts is surely a mistake.
There may be some opportunities to pick up as panicking investors dump holdings of US stocks or funds because they are scared of what Trump might do next, but this is surely a time for holding one’s nerve, not for responding to emotions. The dominance of index tracking funds is making the waves of emotions that sweep stock markets more pronounced than ever but now is not the time to ride those waves.
With signs that progress on peace in Ukraine and Gaza is looking more likely, it is time to be optimistic rather than pessimistic about the state of the world and the major economies.
The UK economy is a different story though. Higher taxes are going to have a negative impact while Trump is aiming to reduce US taxes by cutting Government expenditure. He surely has the better strategy.
Roger Lawson (Twitter: https://x.com/RogerWLawson )
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