From New York to Hong Kong, risk reduction is the priority.
by Vinícius Andrade, Carter Johnson and Michael Mackenzie
From New York to London and Hong Kong, investors are cutting back risk ahead of next week’s tariff announcements, while keeping cash ready to pounce the moment opportunities arise.
All around the world, money managers say they’re turning neutral, stepping back or de-risking their portfolios. Volumes in Treasuries have fallen as traders refrain from taking big positions, with some looking to options trades for insurance before President Donald Trump unveils so-called reciprocal levies next week.
At the same time, many are primed to jump back in, especially if the announcement puts an end to the back-and-forth on tariffs that has roiled markets for months.
“If we get more clarity on the Trump administration’s end-game on tariffs, we could see an unexpected relief rally,” said Anders Faergemann, co-head of emerging-markets global fixed income at Pinebridge Investments in London. “The worst case would be another deadline.”
Like many global counterparts, Faergemann has been seeking out safer assets — moving away from emerging-market junk bonds and adding higher-quality names that are less exposed to US growth.
Ask Aberdeen Investments’ Xin-Yao Ng how he’s preparing and the Singapore-based fund manager gives a similar refrain.
“It is a fool’s errand to try and predict what Trump will do,” he says. But the plan is “to make sure we are invested in companies where their own destiny isn’t as affected by tariff decisions. Then we take advantage of volatility, if any, to bargain hunt if there is meaningful weakness.”
Bets including long positions in the greenback seemed to be the best hedge at the start of the year, but that has been challenged by a weakening in US sentiment, said Anthony Kettle, a senior portfolio manager at RBC BlueBay Asset Management. He’s been using equity instruments — rather than currencies — as a way to shield his portfolio, saying “puts” on US stocks could offer some protection.
“It has been very hard to position for Trump’s policy announcements as they seem quite erratic, perhaps by design,” Kettle said. “We are focusing on the core things we like in EM fixed income but with a reduced gross risk budget and with more overlay hedge (in equity) than we would normally
Here’s what else money managers are doing ahead of the April 2 deadline for tariffs:
Priya Misra, portfolio manager at JPMorgan Asset Management
- “We are positioned for April 2nd by owning duration in the five-year sector, 5s30s curve steepeners and we have de-risked our credit portfolio to account for greater risk premiums.”
- Positioning in five-year Treasuries is not just for April 2 but also for April 4 payrolls
- “There is an ongoing uncertainty shock to consumers and corporates, and we can already see evidence of that in the consumer and CEO confidence surveys. Hard data has been resilient so far, but I worry that the damage might already be done. I expect hard data to weaken in coming months and the market will start to price in more Fed rate cuts.”
- “As much as the market is fixated on April 2nd, I don’t think ‘Liberation Day will liberate us from trade uncertainty because negotiations will likely continue after that date and tariffs have been weaponized.”
Ed Al-Hussainy, rates strategist at Columbia Threadneedle Investment
- In Treasuries, “people are just stepping back and not aggressively putting positions on. Volumes have fallen, especially in the last couple of weeks, liquidity has gotten a little bit thinner.”
- “All of the big kind of reassessment and market moves is still ahead of us. The zone of indifference is very large, the announcement effect [of tariffs] would have to be huge and the impact and the scope and all of that will have to be very big to move us.”
- “On the credit side, we’re waiting for a bigger widening in credit spreads to add risk and it just hasn’t happened.”
Greg Lesko, a portfolio manager at Deltec Asset Management LLC focused on emerging-market stocks
- The mantra for long-only stock investors is “be nimble and own great companies that will weather the storm the best”
- “I have maintained a decent cash pile to take advantage of any volatility”
Brent Donnelly, president of Spectra FX Solutions LLC
- The veteran currency trader says markets are likely to underestimate — and underprice — the full economic impact of the Trump tariffs right away.
- “What we will probably get is a big relief rally in risky assets after April 2 as the market just heaves a sigh of relief that the uncertainty has passed,” Donnelly wrote this week. “Then, we get 6-to-8 weeks of quiet and then the economic data decides the fate of the free world.”
Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA
- “Moderately increasing risk in a diverse range of countries, sectors and currencies,” without further details
- Looking to increase exposure in equities in the US and Japan, bonds in Germany and Switzerland and in EM local currency bonds
Lauren van Biljon, senior portfolio manager at Allspring Global Investments
- “Certainly being very intentional with risk ahead of the next set of trade announcements.”
- Pared back active risk on FX but kept “some exposure” to the Japanese yen.
- Neutral stance on duration, but with a small tilt to the 5-year area in the US.
- “It’s been interesting to see how laser-focused the market has been on downside growth risks in the US – that could extend further as the administration widens its trade conflict net.”
Matthew Amis, investment manager at Aberdeen
- Looking for an opportunity to reinstate gilts long but cautious given “next week’s Liberation Day tariff announcements loom large”
- “We have reduced risk down, yes — still have positions on but re-calibrated the sizes.”
Craig Inches, head of rates and cash at Royal London Asset Management
- “We are assuming that it will be fairly negative for European growth, and also with UK having Europe as its main trading partner, we would expect this to impact the UK despite Trump going easy on the UK.”
- “Stagflation themes should result in lower rates, steeper curves and lower real yields.”
- Long duration in global funds and biased toward steeper yield curves. Also owns real yields.
- Overweight Spain, Italy vs core Europe as 10-year bunds should drift above 3%. Steepeners in US and Europe, overweight 3-year US linkers, 10s30s flatteners in Japan, and overweight 30-year Australian bonds.
Cary Yeung, co-head of EM corporate and head of Greater China debt at Pictet Asset Management
- “If there is any kind of over-widening of credit spread, we are very likely to go into the market and buy on dip strategy because we do think that there is positivity in the market, be it China macro and also maybe some of the story even in US as not exactly negative even under maybe tariff deployment globally.”
- “The development of April 2nd is very binary and uncertain,” said Yeung. But once something is announced, “it will give market a better certainty no matter whether market reacts in a positive or negative way.”
Cheuk Wan Fan, Asia chief investment officer for HSBC global private banking and wealth
- “Take advantage of near-term market volatility, triggered by the trade risk or reciprocal tariff risk, then buy this good quality AI innovation champion and consumption leaders.”
- Likes Indian financials and industrials
- “This will likely bring tactical opportunities for investors to rebuild their strategic exposure to the China equity market on the back of the policy pivot and improved fundamental outlook.”
- “Within Asia, the country that will likely be impacted more would be Vietnam, in fact Korea, Taiwan will also be impacted, because these are the countries that have significant exposure export to the US export markets.”
Nicholas Chui, China equity portfolio manager at Franklin Templeton
- “Our positioning has been centered around the domestic economy in China because that is where the largest opportunity set remains for the years to come.”
- “The geopolitical landscape globally has shifted once more, and we assume that this is part of a new norm.”
- “Tariff news will likely continue to create volatility, which will create opportunities to top up our positions. The recent events around humanoid robots, autonomous driving and artificial intelligence show China’s innovation prowess as well as the large addressable market in China. These sectors are also relatively immune from the tariff impact.”
Xin-Yao Ng, a fund manager at Aberdeen Investments
- “It is a fool’s errand to try and predict what Trump will do, and surely this will not be the end.”
- Principle is “to make sure we are invested in companies where their own destiny isn’t as affected by tariff decisions.”
- “Then we take advantage of volatility if any to bargain hunt if there is meaningful weakness.”
- Buying consumer companies in China, including “platforms like some of the Internet plays, but more of the less-AI ones at this point.”
- In India, interested in small-mid cap space which offer “a lot of opportunities with good structural growth but are now much cheaper than before.”
- “Picked the bottom” on Indonesia but still cautious; watching for Vietnam weakness amid potential “punishment” from the US.
