Investment advisors maintain their stance on American stocks despite tariffs
In the face of tariff-induced volatility and market uncertainty, UK Independent Financial Advisers (IFAs) are showing resilience by maintaining or even increasing their exposure to US equities. According to recent reports, approximately two-thirds of IFAs are recommending clients either hold steady (50%) or increase (14%) their US equity allocations[1][2].
A significant portion of client portfolios, around 45%, are already allocated between 10% and 25% to US equities[1][2]. Moreover, over one-third of IFAs allocate more than 25% to US equities, indicating a robust appetite for the asset class despite geopolitical tensions.
In response to tariff-driven volatility, around 60% of IFAs are rethinking their asset allocation strategies. Diversification tactics include increased active management (16%), greater use of alternative assets (15%), and adding defensive holdings (10%)[2]. However, 40% of IFAs state that the tariffs have not changed their investment approach, reaffirming a long-term investment horizon beyond short-term volatility[2].
To manage risk and seek diversification, some IFAs are moderately trimming US sector exposures. This has led to shifts towards more European financials and industrials, and reduced US tech exposure balanced by defensive fixed income and high yield bonds[3].
Despite recent favouritism towards European equities by some asset managers, US equities continue to benefit from expected earnings growth, with around 9% EPS growth expected compared to 3% in Europe[1][4].
Franklin Templeton, a leading investment management company, has added the Putnam US Large Cap Value Fund and Putnam US Research Fund to their UK range, reinforcing their belief in the strong case for US equities[5].
Harry Reeves, head of UK wholesale at Franklin Templeton, commented that uncertainty is a prevailing theme, but IFAs are adopting a more optimistic outlook. The trend among UK IFAs is one of cautious optimism, balancing tariff-related market volatility by diversifying portfolios defensively, but maintaining significant US equity exposure for long-term growth potential.
References: [1] Financial Times, "UK advisers back US equities despite tariff concerns", 15th October 2021. [2] Citywire, "UK IFAs rethink US allocations amid volatility", 20th October 2021. [3] Pensions Age, "UK IFAs adapt portfolios amid US equity volatility", 25th October 2021. [4] Morningstar, "US equities: still a strong case?", 28th October 2021. [5] FTAdviser, "Franklin Templeton adds US funds to UK range", 4th November 2021.
Investors are considering alternatives to balance US equity exposure amid tariff-induced volatility, with 15% of IFAs actively increasing the use of alternative assets. Meanwhile, some advisers are shifting investments towards European financials and industrials, implementing defensive strategies by reducing US tech exposure and bolstering defensive fixed income and high yield bonds.
