Keep Your Investments Safe Amid the Trade War

Anyone who has kept abreast of the news in the last few months has been aware that a trade war may be looming between the US and China. Both sides have been imposing levies on each others’ imports, and despite sit-downs for negotiations that were held as recently as last week, the tension between the two countries has not abated. Experts predict that this may last at least until the US midterm elections later this year.

And since these are two superpowers we are talking about, it’s highly likely that Asia could be affected by the fallout of this conflict, particularly, according to one writer, Singapore, Taiwan, and Malaysia.

Just how bad is it?

Aidan Yao recently wrote in the South China Morning Post, “As China’s exports to the US decline, its import of components and inputs from other partners will drop too, sending shock waves through global production lines. Japan, Korea and Taiwan appear the most vulnerable, by dollar amount.

But in terms of gross domestic product, Singapore is the most exposed to the fallout from the trade war, followed by Taiwan, Malaysia, Korea, and Vietnam. Assuming 25 per cent tariffs on US$250 billion of Chinese goods, the direct impact on these economies could range from about 0.2 per cent of GDP (for Korea) to over 0.6 per cent (for Singapore).”

People are reportedly getting nervous over the trade war in various parts around the globe, with some even losing precious sleep over it. There is even talk of a global economic crisis, should Presidents Trump and Xi Jinping fail to resolve issues between the two countries. And it certainly doesn’t help that US President Donald Trump lately threatened to leave the World Trade Organization (WTO) if trade negotiations do not go in America’s favour.

So what can an investment-savvy woman do?

Despite all the dark scenarios that may loom over all our heads, many financial experts are quick to reassure everyone that it really isn’t a time to panic or be afraid. Keep calm and savvy on. Fear causes people to make unwise decisions, and we’re here to help with important advice to help you navigate through these current rough waters.

There are a few things that a smart investor can do to protect her investments and keep them safe despite the global hullabaloo. New to the world of investments? Check out our handy-dandy infographic here for a quick briefer on the ABCs of investing.

1. Keep the long view in mind. Take it from billionaire Warren Buffet, who said, “Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

Let’s also take a lesson from Singapore’s own recent history. During the financial crisis ten years ago the Straits Times Index (STI) dropped by almost sixty per cent, only to recover completely. And this is why, while the STI is down by ten per cent from its peak last February, there is no reason to believe that it will not recover.

So don’t make any hasty decisions about your investments, like dumping shares because you think the market is bad, as you may end up regretting it.

2. It could be a good time to diversify your portfolio. If you’ve had only one type of investment category, say stocks, you may want to branch out to index funds or bond funds. If all your investments are in one sector of stocks, you may want to dip your toes in some others. Diversification is one of the best ways to hedge your portfolio in a volatile market such as this one.

And, if you need a little bit of a tutorial as to determining what really matters with investments, we’ve listed the four things that matter when it comes to possible investments.

3. Consider investing in technology. Kirk Hartman, Wells Fargo Asset Management’s global chief investment officer recently said that technology is a smart investment because it drives both the economy and the market. In itself, it remains unaffected by the trade wars.

The tech sector is a constant top performer on the S&P 500, were up by 14 per cent this year. And since China is highly dependent on US technology such as semiconductors, it’s unlikely that China will impose tariffs on this sector.

4. Stay away from sectors directly impacted by the trade wars. What exactly is in the line of fire in this trade war, while neither the US nor China blinks? One example would be the US automobile sector. The biggest market for car manufacturers in China. The more that levies are added, there will be less of a demand in China for cars from the US. American car manufacturers are doubly hit because they now have to pay more for importing steel from Mexico, the EU or Canada.

Tariffs on steel could also affect manufacturers of personal mobility devices and e-scooters, both of which are more and more used in Singapore, as well as in many other countries.

The bottom line…

Don’t let fear over the fate of your investments rob you of your beauty sleep. Yes, your investments are a key to securing financial freedom, but they are also meant to be learned from, and enjoyed, even during the most difficult of times.