LIVE MARKETS-With so much doubt, a risk-off stance may help

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WITH SO MUCH DOUBT, A RISK-OFF STANCE MAY HELP

With uncertainty abounding, investors might want to take a more risk-off approach but without making massive changes to their investing processes yet, according to Chris Zaccarelli, CFA, chief investment officer at Northlight Asset Management.

Citing a lack of clarity around the Trump administration's tariff policies and signs it is upending U.S. overseas political relationships, he said: "Uncertainty is probably the most important word for this year."

"If things are going to change dramatically, you want to be taking less risk," said Zaccarelli. "You want to make sure that you're not necessarily overweight any particular area that did really well in the past."

For example, adding gold might make sense, as he asked: "Is the world moving a little bit more towards gold and a little bit more away from the U.S. dollar and away from U.S. Treasuries?"

Overall, Zaccarelli suggests more balance, more risk off than risk on, a focus on value, and on shorter-duration bonds.

"Four to five years' duration across your entire portfolio might be a little bit more prudent than having an overall average of six years," he said for fixed income bets.

In stocks he points to healthcare and financials.

"The real kryptonite for the financial services sector is increases in regulation, increased reserve requirements," he said. If the current administration means less regulation and reserves, "the No. 1 threat to the financials sector is likely going to be lessened, if not to some extent eliminated."

So what about the popular Mag 7 stocks?

While Zaccarelli is not suggesting exiting these stocks, he says it makes sense to reduce their percentage within a portfolio, as in possibly "avoiding them for new money."

Aside from the fact that they already have high valuations he said: "They're so priced for perfection that if they only do very well instead of exceedingly well or surprisingly well their stocks could fall."

As for interest rates, the money manager is expecting higher-for-longer, with no changes this year, unless, counter to his current expectations, the economy implodes, or inflation goes through the roof.

(Sinéad Carew)

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