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March 26, 2018, 5:50 a.m. EDT

How investors can protect against a trade war — in one sentence

UBS Wealth Management’s Mark Haefele offers a game plan focused on stock sectors and regions

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By Victor Reklaitis, MarketWatch


Reuters
President Trump has sparked an upswing in talk about trade wars.

Worries are persisting this month about a potential global trade war, helped by news that the Trump administration is gearing up to impose tariffs on at least $50 billion of Chinese goods.

That news tied to the world’s second-biggest economy comes after President Donald Trump earlier this month moved ahead with tariffs on steel and aluminum imports, though he exempted a number of trading partners.

Concerns may be abating somewhat on Monday, thanks to Treasury Secretary Steve Mnuchin saying that he’s “cautiously hopeful” about avoiding tariffs as Washington and Beijing negotiate.

In any case, what should investors worried about a trade war do?

Mark Haefele, the global chief investment officer for UBS Wealth Management, has offered this game plan in a 55-word sentence that came at the end of a three-page note:

“Investors who wish to protect their portfolios against the risk case of a full-scale trade war should ensure they are not overexposed to export-oriented equity regions (Germany, Japan) or sectors (machinery, car manufacturing), and ensure adequate global diversification, including assets in the U.S., where some sectors could benefit directly from the tariffs (e.g. steel manufacturers).”

Read more: Panicked about stocks? What you need to remember fits on one note card

And see: Is this all the investing advice you’ll ever need?

“A major global trade war is a risk, but unlikely, and there is enough positive news on the global economy to keep us overweight global equities,” Haefele also said in the note dated March 12, meaning his shop recommends tilting portfolios toward stocks.

Global stocks — going by the $12 billion Vanguard Total World Stock ETF /zigman2/quotes/202040789/composite VT +2.02%  — are down 3% in 2018, but they’ve advanced 11% over the past 12 months.

Check out: One way to play Trump’s tariffs — buy steel stocks and ‘enjoy the heat’

And read: The big-name stocks in the crosshairs as trade-war worries reboot

“Overall, the potential risk from an escalation in trade frictions is another reminder of the benefits of maintaining a well-diversified investment portfolio,” Haefele added.

Don’t miss: Go big on stocks as Trump has 1 huge reason not to launch a trade war

During last month’s selloff for global stocks, Haefele said markets had been “overdue” for a pullback, but the drop had become “overdone.”

Click to Play

How we got here: A history of U.S. steel wars before Trump

President Trump is considering imposing steep tariffs on foreign steel and aluminum, sparking fears of a trade war with China and other nations. But he is not the first U.S. President to impose tariffs and quotas on foreign steel.

This story was first published on March 14, 2018.

/zigman2/quotes/202040789/composite
US : U.S.: NYSE Arca
$ 94.01
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Victor Reklaitis is a London-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

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