Where to Invest Cash in Times of Tariffs

The million dollar question for investors trying to navigate the trade waters is where to place their cash to safely sail through this storm. Wall Street has been sifting through the typical safe havens, as spat after spat of trade wars began this spring. We first have to examine the current economic climate to see what makes sense. It happens to be about monetary policy and the dollar, which has been propelled by expectations for stepped-up Federal Reserve tightening, and has hammered a wealth of markets since April, when benchmark 10-year Treasury yields first peaked through 3 percent. Let’s take a look at the usual suspects, and see how they are faring in this volatility.

Gold, which has been a haven for millennia in times of turmoil, hasn’t been so hot the past three months, falling more than 5 percent.

Japan’s yen, often a safe harbor primarily due to the country’s status as the world’s biggest net creditor, has dropped almost 3 percent in that period.

Switzerland’s franc, another favorite for the cautious, is also down 3 percent.

Behind the declines of all three has been the appreciation of the dollar, up more than 4 percent as measured by the Bloomberg Dollar Spot index. Those that think of Bitcoin as a non-correlated asset class are not being supported by the markets. Nobody really cares about Bitcoin for now. All roads eventually lead back to the greenback. And why shouldn’t they? Again the not so subliminal message is that despite the constant anti-Trump rhetoric, the U.S. is still the best thing in the world for a risk-free return. Patrick Artus, chief economist at Natixis Securities, wrote of U.S. government securities in a note this week that, “They are a safe haven even when shocks come from the United States.”

Risk management is always key, and especially in volatile markets. Let Modern Portfolio Theory remind you that it is not which equities or individual securities you are in, it is the portfolio as a whole, and the gestalt principles of asset class allocation are the only thing that matters. Volatility suggests a greater weight toward cash and bonds, where investors appear to be heading now. “Liquidity management instruments such as money market funds are good for investors to park cash in dollars,” said Fan at HSBC. “When more attractive levels emerge, they can put cash back to work,” she said.

With that said, the longer-term time horizon will allow you to think of including different asset classes in your portfolio. Australian equities have proven that a strong Australian dollar is currently working well for Australian companies. India is also on analyst’s radar, where the S&P BSE Sensex Index is up about 2 percent since the end of the first quarter in dollar terms, compared with a 9 percent tumble for the MSCI Emerging Markets Index.

With what appears to be the same story, just a different season, the U.S. dollar and its dollar-denominated instruments still control the world of so-called risk-free investments. I do not envy those who have to guide money through these markets for a living. While there has always been stress, it is now ratcheted up to a new level.

About John Thomas

John Patrick Thomas is a four-time cancer survivor who lives with his family in South Florida. John attended Gettysburg College and The American University before embarking on an entrepreneurial career on Wall Street. He turned to the teaching profession after his life-threatening bout with bone cancer. John has recently written a #1 Amazon Cancer Bestselling book entitled, “A Call to Faith, the Journey of a Cancer Survivor.” He has appeared in publications such as The New York Times, The Wall St. Journal, The Washington Post, Memorial Sloan-Kettering Cancer Center publications, and was featured in new DayStar network series, “Impact with Pastor Dave.” He has traveled as a missionary and may be one of the few people that tell you cancer was the best thing to ever happen to him. You’ll have to ask him why.

One comment

  1. The chinese have been piling on debt to get in the IMF sdr “basket” . The chinese the russians …many others all want a global monetary system.they will dump treasury debt slowly then dump them all,…by by dollar.they will purposely collapse the entire paper and digital house of cards.prove me wrong.Greenspan said it in 88 … digitalize it all…its evil.

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