Even as the Trump administration has backed off from hitting Canadian and Mexican imports with tariffs, the threat has not gone away.
A 30-day reprieve kicks the can down the road, but the concern for investors and advisors is still very much on the table.
It is leading to new conversations about how to prepare portfolios for the next tariff deadline, and a decision that could go the other way this time.
While Canada and Mexico are off the hook for now, the trade war is underway with China. This week, the U.S. slapped a 10% tariff on Chinese imports, and China hit back with a 15% tariff on some U.S. goods, as well as a 10% tariff on others.
A commercial truck heads toward the U.S. Customs and Border Protection Pacific Highway Port of Entry from south Surrey, British Columbia, Canada, on Nov. 26, 2024.
Jennifer Gauthier | Reuters
John Davi of Astoria Portfolio Advisors told CNBC’s “ETF Edge” this week that he believes there is an opportunity for investors, but it takes a different mindset and investing outside of the big-cap tech stocks that have been a major stock market driver. “Tariffs are, by nature, inflationary,” said Davi. “Investors should start to allocate toward these real asset sectors,” David added.
Recent data shows inflation is still above the Federal Reserve’s stated target of 2%. Even if tariffs don’t show up in the data, they are likely to raise prices for Americans.
Chicago Fed President Austan Goolsbee warned of the inflationary pressure of tariffs. He said the Federal Reserve “will take into account anything that raises prices” when it comes to monetary policy. Boston Fed President Susan Collins also raised the issue in an interview with CNBC’s Steve Liesman on Monday.
VettaFi’s Todd Rosenbluth cautions the stock market may be offsides when it comes to accounting for the market impact of tariffs and higher prices. He said “this is something investors and advisors are not fully prepared for.”
In terms of what to do, both Rosenbluth and Davi had specific advice. Davi’s firm is trying to look at sectors that benefit from inflation. “Energy, industrials [and] materials” are a focus for Astoria Portfolio Advisors as the firm “picks the highest quality stocks in those sectors” for its AXS Astoria Real Assets ETF PPI.
The search for inflation winners.
The materials sector could fare well if prices rise.
The S&P Materials sector is flat this week, but up about 7% in a month. Newmont, Nucor and Eastman Chemicals are the leader during that period.
The industrials rank 5th of 11 sectors so far this year.
The S&P Industrials is down so far this week and up 3.3% in a month led by GE Aerospace, 3M and Delta Airlines.
Rosenbluth is telling investors to look at “real asset” stocks and sectors. He suggested VanEck’s Inflation Assets ETF RAAX, which is up 1.5% since Monday’s tariff drama hit the markets. It is an ETF that investors in other ETFs, the biggest components are the VanEck Merk Gold Shares, VanEck Commodity Strategy ETF and the VanEck Energy Income ETF. The RAAX is up 5.2% over the month compared to a 1.83% gain for the S&P.
