Investors should get set for market volatility in coming months amid brewing tension between the US, Europe and China over global trade, according to Deutsche Bank Wealth Management’s Chief Investment Officers.
The impending trade dispute is compounding other concerns in, for example, Italy and the Eurozone, along with a general increase in volatility in this late stage of the market cycle, according to Chief Investment Officer Christian Nolting, debating the issue with his US, German and APAC colleagues in the latest edition of CIO Insights.
Even so, the likely outcome still appears to “containable”, with a limited period of bilateral trade conflicts rather than a drawn-out trade war, he said.
“The long-term outlook for global growth is still on track, and “late-cycle” returns are often good – but you do need to safeguard your investments against a potentially bumpy path ahead,” Nolting said. “In short: stay invested, but hedge.”
Larry Adam, CIO and Chief Investment Strategist for WM Americas, said progress on trade policy is a key theme in US President Donald Trump’s pitch to voters who are disillusioned with trade in his attempt to retain majorities in both Houses of Congress in the November mid-term elections.
Helmut Kaiser, Chief Investment Strategist for Germany, said that as long as the US economy and the dollar are predominant, the US trade deficit will remain economically sustainable. Export-focused European companies may have more to lose from a conflict than their less export-dependent US counterparts, he added.
Tuan Huynh, CIO for APAC and Head of Wealth Discretionary APAC, analysed the Chinese perspective, saying it is unlikely that Beijing will want to exert “soft power” yet against individual US companies. However, he said he is concerned that markets and companies are still struggling to assess the direct and indirect consequences of the situation.
To read the full discussion, click on the "Related documents" link below.