Credit investors have been warned that they will have to strategically adapt their portfolios to account for the impact of Trump’s tariff wars.
A new report from Janus Henderson has warned that the ripple effects of the US President’s tariffs will span sectors such as automotive, technology and commodities.
Janus Henderson’s EMEA global head of credit research Mike Talaga, and client portfolio manager Celia Soares said this means that businesses and investors must adapt strategically to navigate the uncertainties.
For companies, this might involve revising pricing, supply chain management, and considering manufacturing shifts.
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Talaga and Soares added that investors should employ focused credit research to identify companies with robust financial health and operational stability.
“Emphasising adaptability and resilience is key to mitigating risks and leveraging opportunities in this rapidly changing trade environment,” Talaga and Soares said.
“We believe that a robust credit research process to select issuers who are well-placed to overcome these challenges is key to effectively steer through these uncertain waters.
“Currently, our emphasis is on actively investing in companies that boast strong balance sheets, solid liquidity, and operations characterised by consistent cash flow stability and/or the potential for growth.”
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The research concluded that Trump’s tariff wars mark a complex chapter in global trade dynamics, with far-reaching impact across various sectors. While it is still too soon to predict how the strategy will unfold, Janus Henderson believes that it could result in pricing dislocations which present both relative value opportunities and risks.
“It is crucial for investors to engage in strategies that actively address these challenges, with a dynamic approach to allocate across regions and sectors,” said Talaga and Soares.
“For example, automotive companies represent a material proportion of both investment grade and high yield indices.
“We have maintained a defensive stance towards the sector, recognising not only the rising threat of global trade wars, but also the subdued outlook for production volumes this year and the challenges arising from the uneven roll-out and adoption of electric vehicles around the world.”
