With the broad market in constant vacillation recently do to trade war news, investors have been more anxious than usual. Some have scampered into cash, while others are invested in bonds or gold, seeking safety. Many investors are left wondering whether to try and time the markets or to sit out entirely.
“[The trade war outcome] certainly seems to be pushed out. You know we’ve been talking about this for sometime. We’ve used game theory, all kinds of analysis, and I do think this is going to be far more protracted then when you asked me about this say 18 months ago. And I think we just have to, and you have two choices As a portfolio manager. You can tell your clients that maybe they should go into cash and suffer through capital gains, or plow ahead and try to find, within this noise, rational investments that you think will be durable throughout this continued volatility,” explained Peter Andersen of Andersen Capital on CNBC.
“The whole point is to trade this appropriately, you’ve got to actually get get three things right: you’ve got to get right the proposal from country A– China or Japan, the response from country B, and then perhaps most challenging of all what it means for markets. And so rather than do that, I’d rather focus in on the kinds of companies whose business models do not depend on a binary outcome, a particular path or pace,” said Scott Clemons, of Brown Brothers Harriman on the same show.
Which type of companies are most reasonable to consider in this regard?
“Well things that are relating to the consumer is where we’re finding it because of the resiliency of the American consumer and spending seems to continue apace no matter what is happening in the White House or with China… Anything in consumer staples or discretionary, where there are business models that sell essential products and services, strong free cash flows, oil customers. Those companies aren’t immune from the trade dispute with China, but they are at least a little bit inoculated against them,” Clemons explained.
ETFs that investors might look to consider therefore would include the S&P Consumer Staples ETF (XLP), the S&P Consumer Discretionary ETF (XLY), and the Health Care Select Sector SPDR Fund (XLV), according to Clemons.
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