US approach to tariffs is challenging investment styles, says HRIS

Equity losses from the recent volatility, driven in large part by the US approach to tariffs, will hurt investors who have chosen a market cap equity approach, says Hymans Robertson Investment Services (HRIS). It claims that those who have taken a multi-factor approach would have had less exposure to current high-risk sectors. These sectors include technology, which has been significantly impacted by investors profit-taking or moving to a risk-off strategy, as they try to manage the impact of the volatility.

Commenting on how different approaches are playing out in the market right now, William Marshall, CIO, Hymans Robertson Investment Services, says:

“Looking across at the various strategies it shows that a broader approach to regional and sector allocation has held up better on a relative basis. Investors that may have been drawn to the technology sector by “exciting” growth strategies will have likely hit the ground recently with a bit of a bump, as this area of the market had been bid-up so much over the last couple of years, that it looked an increasingly expensive and crowded trade. However, the impact of potential tariffs from the US has led to some anxiety amongst investors leading to profit-taking and a change in sentiment to a more risk-off strategy. It looks like this change in wind is leading to a rebalancing away from these more expensive assets.

“Any major slowdown in US economic growth would impact other equity markets also, but we’re not there yet. European and UK markets have generated strong returns so far this year, albeit they have fallen back too over the last few days.

“The dramatic switch in factor sentiment, away from growth and momentum factors to value, is a useful reminder of the importance of adopting a multi-factor approach to investing.”