How to defend your investments as the Trump trade war rages

Don’t panic, stay diversified, focus on the long-term, and look out for opportunities. 

That is the message from investing experts as US president Donald Trump kicked off his trade war against the rest of the world.

Many investors are heavily exposed to the US, which has generated huge returns in recent years, as it dominates global markets and therefore portfolios and pension funds.

We looked at how to diversify your investments away from the US if you fear a ‘Trump slump’.

And below, we round up advice from top money gurus as the world absorbs Trump’s swingeing tariffs, plus their tips on where to invest now.

Time and again stock and bond markets recover from shocks

‘This unpleasant shock, which could potentially send the global economy into spasm, can be seen in the negative initial reaction from global equity markets,’ says Jason Hollands, managing director at Evelyn Partners.

‘It’s not only stock markets that will be affected by this economic shock. The potential impacts on personal wealth and UK households could range far and wide.’

Jason Hollands:  Whether investments are held in pensions, Isas or elsewhere the key is not to panic

Hollands suggests sitting tight and avoiding any rash decisions, explaining: ‘It’s not clear how this will play out, certainly in terms of the impact on interest rate movements.’

‘Above all, whether investments are held in pensions, Isas or elsewhere the key is not to panic. 

‘We see time and again that economic shocks hit equity or bond markets in the short term but that in the medium to long term they recover.’

‘It is easy to think about selling or switching to ‘safer’ assets when you see your portfolio go into the red but that is usually not the best policy.’

Hollands says that if your portfolio was already well positioned and diversified ahead of the tariff announcement it would include gold, some value stocks in more defensive sectors and government bonds, and would be having less of a rollercoaster ride than one devoted to growth stocks.

Market shift has caught many investors off guard

The news about US trade tariffs has reignited concerns around global growth and disrupted investor confidence, says Fidelity International’s investment director Tom Stevenson.

But he notes this is not an isolated event, but marks part of a broader shift across global equity markets.

‘After more than two years of US dominance, particularly in large-cap tech stocks, we’re now seeing a change in momentum as growth moderates in the US and improves in regions like Europe and China.

‘This shift has caught many investors off guard, especially those with portfolios closely aligned to global indices like the MSCI World, which remain heavily weighted towards the US.’

‘The result is an often-unintentional concentration in a single market and sector, making investors more vulnerable when conditions change and limiting exposure to recovery and growth opportunities elsewhere.’

Stevenson says the latest developments are a timely reminder of the value of diversification and long-term discipline.

‘Volatility is the price investors pay for higher returns over time, but it’s not the same as risk.

‘By holding a mix of assets, maintaining a cash buffer, and continuing to invest regularly, investors can navigate short-term uncertainty while keeping their long-term objectives firmly in sight.’

Susannah Streeter: For investors owning quality companies over the long term, big bumps in the road are part of the journey

Investors can take advantage of lower prices and benefit during a recovery

‘It’s important that during times of volatility eyes are kept on long-term investment horizons,’ says Susannah Streeter, head of money and markets at Hargreaves Lansdown,

‘Time in the market and diversification have consistently been the foundations of successful investing strategies.

‘For investors owning quality companies over the long term, big bumps in the road are part of the journey.’

Streeter says the strategy of drip-feeding your funds into investments can help mitigate risks and pay off in uncertain times.

‘It means investors may be able to take advantage of lower prices and benefit during a recovery, to help smooth out sharp market movements over the longer-term.’

In terms of opportunities, Hargreaves is tipping bonds, US smaller companies and gold, and suggests taking a look at the following funds.

Invesco Tactical Bond (Ongoing charge: 0.70 per cent) is co-managed by Stuart Edwards and Julien Eberhardt. They can invest in all types of bonds, with few constraints placed on them, says head of fund research Victoria Hasler.

They aim to shelter the fund when they see tough times ahead and seek strong returns as more opportunities become available. We think this is a good fund for exposure to the wider bond market.

Artemis US Smaller Companies (Ongoing charge: 0.87) seeks out smaller companies with good potential for their share price to grow relative to the risk of the business.

We like the way the manager considers how the US economy is performing to identify sectors that are benefiting from trends, as well as the areas that are finding things tough. Smaller businesses are often among the most innovative and offer lots of growth potential.

The managers of Troy Trojan (Ongoing charge: 0.88 per cent) look to take advantage of the attributes of gold without putting all their eggs in one basket.

Rather than trying to shoot the lights out, the fund aims to grow investors’ money steadily over the long run, while limiting losses when markets fall

Darius McDermott: With Trump the ringmaster of daily volatility, investors will need some ballast in their portfolios, and bonds can do just that

Look past the noise and focus on the bigger picture

Fortune favours the well-informed and this isn’t the time to sit on the sidelines, according to Chelsea Financial Services’ managing director Darius McDermott.

‘Thematic investing isn’t about chasing fads or timing the market – it’s about positioning capital in the right sectors before everyone else catches on.

‘In a world where Trump-induced liquidity turbulence can turn markets upside down overnight, the winners will be those who look past the noise and focus on the bigger picture.’

McDermott tips funds invested in bonds, gold, UK small and mid caps, infrastructure and sustainable assets.

Invesco Bond Income Plus (Ongoing charge: 0.94 per cent) delivers steady income streams while insulating against wild market swings, says Darius McDermott.

With Trump the ringmaster of daily volatility, investors will need some ballast in their portfolios, and bonds can do just that.

Jupiter Gold & Silver (Ongoing charge: 0.93 per cent) offers exposure to precious metals and mining equities, ensuring a portfolio isn’t entirely at the mercy of central bank indecision.

Tangible assets should provide a complementary hedge, particularly given central banks’ penchant for flip-flopping on rates, and inflation refusing to stay buried.

VT Downing Unique Opportunities (Ongoing charge: 1.01 per cent) and Schroder British Opportunities (Ongoing charge: 1.40 per cent) are dedicated to unearthing hidden gems in the UK’s small and mid-cap sector, a hotbed of underappreciated potential.

With strong balance sheets and serious growth prospects, these companies are well-placed to thrive over a longer horizon.

Morgan Stanley Global Brands (Ongoing charge: 0.90 per cent) provides exposure to world-class companies with serious pricing power – the kind of companies that weather storms and keep customers coming back, recession or not.

While European businesses deserve attention, global diversification remains crucial.

First Sentier Global Listed Infrastructure (Ongoing charge: 0.80 per cent) taps into essential services like transport, utilities and energy – sectors that will keep growing no matter who’s in power.

Infrastructure is a sector that never goes out of fashion and remains one of the great multi-decade themes.

Regnan Sustainable Water and Waste (Ongoing charge: 0.97 per cent) focuses on companies tackling the global water crisis and waste management challenges, sectors that are only set to grow as populations rise and regulations tighten.

Sustainable investing is no longer just a nice-to-have, it’s where long-term capital is being deployed. Indeed, in the long run, it is smarter investing, not just virtue signalling.