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Key points:
Geopolitics and trade headlines create heightened risk aversion and market volatility Diversification beyond US tech and into broader global markets seen as prudent Positive outlook on equities in Asia and emerging markets, including China Gold considered a safety valve with 5-15% portfolio allocation suggested
Geopolitical events and global trade tensions continue to dominate market sentiment, according to Matthew Hegarty from Xcap Partners. Hegarty points to recent developments at Davos, such as Mark Carney’s remarks on the fragile rules-based order and Donald Trump’s threat of a 10% tariff on select European nations, which has led to heightened risk aversion across global equities, bonds, and the US dollar. The renewed volatility prompts investors to weigh the implications of ongoing geopolitical shifts, including Canada’s controversial deal to allow Chinese electric vehicles into the country, further intensifying trade war concerns.
Hegarty views last year's strong performance outside the US as evidence that geographical diversification remains prudent. He suggests investors should move away from heavy concentration in US tech stocks in favour of a broader, more balanced global portfolio. With the expectation of US rate cuts and lingering questions over inflation, Hegarty advocates for a constructive stance on equities worldwide, highlighting opportunities in Asia and emerging markets, including China, due to undervaluation and robust trade surpluses.
Gold also features in Hegarty’s approach, with reference to Ray Dalio’s suggested allocation of 5-15% in gold amidst central bank buying sprees. Hegarty warns that maintaining ample liquidity and being ready to buy on market pullbacks can be advantageous, given considerable policy uncertainty.
