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Investors look for safety amidst Wall Street uncertainty


Investors safety Wall Street uncertainty

Investors seek European and emerging market assets for protection against U.S. stock and bond turbulence.

In April, Wall Street had a major decline. The S&P 500 share index and US Treasuries both had their biggest monthly decreases since September. Currently, money managers are trying to figure out how to stop losses in case the trend doesn't change.

The reorganization of portfolios that have been buoyed for years by highly valued U.S. stocks may be necessary, according to Sonja Laud, CIO at Legal & General Investment Management, which oversees approximately $1.5 trillion. She said diversification is important for the future. LGIM prefers European stocks over American ones, even though they don't expect better returns from international stocks.

The largest asset manager in Europe, Amundi, has senior multi-asset manager Amelie Derambure. She stated that while she had purchased put options to hedge against a 10% decline, she was still expecting long-term profits from U.S. stocks. She had also moved some money from Treasuries into bonds issued by the Eurozone.

In April, the S&P 500 dropped 4.2%. Getting away from US assets could be difficult. The Stoxx and S&P have had an 88% correlation between them since 1986, according to Baird's Yarrow, indicating that the Stoxx tends to follow the S&P. According to Barclays research, treasuries also have a significant impact on foreign debt markets. A one percentage point increase in 10-year U.S. yields typically causes a 56 basis point increase in global yields.

Investing more in other regions and reducing investments in the United States is a difficult decision, as Leroux of Carmignac mentioned. He continued by saying that, despite correlations, there are times when something else does better.

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