In a market update on Tuesday, Sam Ruiz, global equity portfolio specialists at T. Rowe Price, said despite the recent pause in tariffs acting as a glimmer of hope for global markets, “the future remains uncertain as companies are withdrawing guidance due to an unclear outlook”.
As such, the global investment manager, which was already underweight US equities, said the T. Rowe Price Global Growth Equity Strategy has made several portfolio adjustments to align with this approach.
“We are reducing exposure to US equities and mega-cap tech stocks due to changing market dynamics and uncertainties,” Ruiz said.
“Instead, we're increasing investments in Europe and select Emerging Markets to capture growth opportunities outside the US.
“Additionally, we're focusing on companies with resilient business models and sticky customer bases, such as those in consumer staples, utilities, and insurance sectors, which we believe offer some hedging against inflation and interest rate hikes.”
Elaborating on the latter, Ruiz said the investment manager favours sectors and companies that are more sheltered from tariffs.
“In the healthcare sector, we've identified select opportunities where companies involved in innovative pharmaceutical developments we believe can benefit from growth trends without direct tariff exposure,” he said.
T. Rowe Price’s announcement comes amid a stock market bounce back with the S&P 500 up 3.26 per cent in the five days to 12 May (10 am AEDT), and the Nasdaq gaining 4.35 per cent over the same period.
Year to date, despite strong market volatility throughout April, the S&P 500 is down just 3.26 per cent, and the Nasdaq 4.25 per cent.
However, Ruiz said, with valuations at levels similar to the beginning of the year, the backdrop for strong returns appears “challenging”, especially with the likelihood of earnings cuts.
“A more defensive investment strategy is needed to navigate these market dynamics,” he said.
Despite the caution, however, Ruiz advised against adopting an overly defensive position, noting that a positive resolution on tariffs could lead to favourable policies such as deregulation and tax cuts, which would benefit the market.
“Our approach is a balanced strategy that seeks to mitigate risks while positioning for potential upside in the event of favourable policy changes,” he said.
In early April, BlackRock reduced its US equity exposure to neutral, only to reverse course and shift back to an overweight position just a week later.
Namely, following Donald Trump’s announcement that a majority of the heavy-handed ‘Liberation Day’ tariffs would be paused, BlackRock announced it was renewing its overweight call on US equities.
The vote of confidence came after the S&P 500 rebounded nearly 6 per. And despite it still, at the time, sitting at some 13 per cent below its February high, BlackRock said it was confident US equities could “regain their global leadership”.
At a conference last week, top fund managers warned that global markets are undergoing a structural reset as the era of passive, momentum-led rallies gives way to a more volatile, geopolitically influenced cycle – requiring sharper stock selection and regional rebalancing
Meanwhile, Ten Cap’s latest portfolio outlook has suggested a more centrist, flexible stance is essential in an environment where policy clarity remains elusive.
