How multi-asset managers have reacted to tariff turmoil

It now seems strange to think that for most of 2024 we were in an environment of low volatility, with equities grinding ever higher.

Last year was the second year in a row that global equities recorded returns of around 20%* but, crucially, barring a brief spike in August – when fears of a US recession and a major unwind in the yen carry trade spooked markets – concerns around volatility were firmly in the background.

The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market. A number greater than 30 is considered to signal heightened volatility from increased uncertainty, risk and investor fear. VIX values below 20 generally correspond to more stable, less stressful periods in the markets. For much of 2024, it has been below 20**.

But I think we can accept that 2025 (and possibly beyond) is likely to be very different with President Trump at the helm. Liberation Day (April 2) saw Trump announce his “reciprocal tariff” strategy which sent global markets into a tailspin. The increased uncertainty and implications these tariffs could have on trade flows, company earnings and other macro-economic variables are not to be underestimated.

In their immediate aftermath, markets started to try to price the probabilities of the multiple potential futures that these tariffs present, with many just selling and asking questions later. We’ve since seen a 90-day pause on all universal tariffs – setting off a relief rally in markets. But volatility remains; the VIX peaked at 52.3 earlier this month** (the highest level in five years) and while it has fallen back it is, as of writing, still above that 30 point level of heightened volatility**.

Falling prices are not new – 10% falls happen in more years than not and 20% falls happen once every four years. It is normally a period to stay calm, but are there opportunities and safe havens investors may want to consider? We spoke to a few of our Elite Rated multi-asset managers to get a view on how they have handled the impact of tariffs and their outlook from here.

Risk-off moves made before Trump announcement – varied opportunities but caution is prominent

The general consensus from the managers we spoke to is that they had been de-risking their portfolios to variable degrees prior to Liberation Day. Aegon Diversified Monthly Income manager Vincent McEntegart says they had been gradually taking risk out of credit in recent months, citing credit spreads reaching record lows; while on the equities side, many had cited excessive valuations as the main rationale for bringing their equities valuations towards a more neutral position.

Schroder Global Multi-Asset Cautious co-manager Tara Fitzpatrick says the team were pro-equities heading into 2025. This had mostly been through the US, but they started diversifying towards Europe. She says: “As we progressed through 2025 we have started to see some worrying signs, like the US consumer coming off, we have rotated some of that overweight into Europe and also taken all of our high yield credit out of the portfolio.”

M&G Episode Income investment specialist Oliver Langford says they had also cut their equities exposure from 50% to 45%, citing excessive valuations. He says the recent sell-off was not enough for them to consider adding, pointing to the increased volatility and an element of panic selling from investors. He also believes many will want to see the impact of tariffs on earnings season and wider company fundamentals.

Vincent agrees: “We are still not aware of how willing the President is to put the world into recession. Corporates are now in a tough position as their company profits are now clouded for the next 12 months.”

Safe havens, inflation and stagflation

Aggressive sell-offs usually result in investors selling some of the most liquid assets they invest in to make up for equity losses – this is often the likes of physical gold or US treasuries. As a result, some managers have taken profits on the former following its strong run that saw it break $3,000 an ounce barrier earlier this year. As things have settled down, gold has once again become a safe haven for investors, as has the Japanese yen. However, Oliver says other areas like US Treasuries (and the US dollar) have not – which is unusual. 

He says that following the announcement bonds initially behaved well, but started to sell off in the days after – something he believes is largely a US-specific phenomenon, as investors are feeling spooked at holding US-denominated dollar assets.

He says: “Seeing yields spike on US Treasuries was feeding off into other markets which was a sign to us of irrational market behaviour. All developed market duration was getting hit, even though we felt this was a US phenomenon.

“Gilt yields spiked above 5.5% on the 30-year (April 9) and to us that did not make any sense with inflation falling and the potential for growth dropping in the UK. So this was a potential opportunity for us to add to our gilt exposure. We’ve taken our duration from 5 to 5.5 years. This is pretty high in terms of the fund’s history and it is in the context of being conservative with the portfolio given what is going on.”

Schroder’s Tara Fitzpatrick says there are now real stagflationary risks out there in the market, with the team de-risking to a degree by shrinking their equities overweight and removing their underweight in government bonds.

Income opportunities

Some managers have highlighted income opportunities. VT Momentum Diversified Income manager Richard Parfect says they have been adding to a number of specialist income names – citing attractive discounts and solid income returns. 

He says: “I don’t believe the names we are buying are susceptible to the first order of tariffs. Clearly the second and third tranches are harder to quantify but I do not see how this will impact digital infrastructure in Europe; battery storage in the UK; logistics/warehouses; and rents in the UK. All of which look attractively priced.”

Aegon’s Vincent McEntegart says the team have been focusing on shorter-duration assets, citing inflation remaining above the 2% target prior to Trump’s announcement. He also cites the potential for high yield to remain an attractive option.

He says: “We’ve seen credit spreads go from 300-400 basis points and that, coupled with government bonds of 4.5%, means we can get an income of 8.5% from high yield. That is an attractive income and while defaults are a concern, we would be confident in our credit analysts avoiding the majority of credit selection challenges.”

*Source: Halifax

**Source: VIX index, accessed  at 17 April 2025

***Source: BullionbyPost, at 17 April 2025