The stock markets are volatile, and the trade conflict triggered by the US government under President Donald Trump is causing unrest. Fund savers in particular are wondering whether investing in US stocks still makes sense.
Trump’s announcement of new tariffs is putting US stocks under considerable pressure. Nevertheless, many private investors have so far reacted calmly despite the recent turmoil.
Christian Röhl, chief economist at broker Scalable Capital, reports stable customer activity:
‘The majority of our investors are pursuing a long-term strategy with ETF savings plans and ETF positions. We are not observing any panic selling or significant cancellations of savings plans.’
MSCI World: A strong focus on the US
Many investors invest in the MSCI World, a broadly diversified index comprising 1,400 equities from 23 industrialised countries. However, due to its weighting by market capitalisation, US stocks such as Apple (NASDAQ:), Nvidia (NASDAQ:) and Microsoft (NASDAQ:) dominate the index. Around 70% of the MSCI World is accounted for by US companies, while other countries such as Japan, the UK and Germany make up significantly smaller proportions.
Europe as an alternative?
Those who want to reduce the dominance of the US in their portfolio can focus on other regions. Carmen Bandt from Kidron Vermögensverwaltung recommends a mix of the and the Eurostoxx 600: ‘This gives investors a more even distribution, with around half of the shares from the US and the other half from Europe.’
Another option would be to invest more in emerging markets. Index funds on the include stocks from countries such as China and Brazil and offer broader geographical diversification.
Dividend stocks as a more stable alternative
Dividend indices can also be an interesting choice. These focus on companies with solid dividend payments and less technology-heavy business models, which also reduces the US share of the portfolio. Index funds geared towards such dividend strategies are a good option for private investors.
Don’t ignore currency risks
Another factor weighing on US investments is the decline of the dollar against the euro. Since the announcement of new tariffs, the dollar has lost around 10% of its value, which is having a negative impact on euro-based funds with a high US exposure.
For investors who want to protect themselves against further currency risks, there are currency-hedged fund options. However, these protection options come at a price. ‘The hedging costs are heavily dependent on the interest rate differential. As interest rates in the US are currently significantly higher than in Europe, the fees are correspondingly high,’ explains Röhl.
Hold or Switch?
Should investors now sell their US equities or ETFs? The majority of experts, including us, advise against this. The US remains a key economic region with numerous successful companies. Carmen Bandt emphasises: ‘Even with trade conflicts, the economic strength of the US will not disappear. It would be a mistake to completely remove US equities from your portfolio.’
For fund savers, the key is therefore to stay calm, keep their long-term asset accumulation in mind and regularly review the composition of their portfolios. A balanced approach remains the key to success, even in times of uncertainty.
I also believe this is the right strategy. We have made extensive use of the past few trading days to review our positions. The result: 16 purchases this month alone. An absolute record.
We are consistently pursuing our strategy: strengthening the most promising equity positions in the US, systematically expanding European and Chinese equity positions while investing in numerous ETFs, including , EuroStoxx600, S&P 500, Emerging Markets, MSCI World and .
Now it is even more important to buy the right stocks at the right time and avoid risky ones. InvestingPro and Liberty Stock Markets are already helping hundreds of investors make successful trading decisions every day.
Disclaimer/Risk warning:
The information provided here is for informational purposes only and does not constitute a recommendation to buy or sell. It should not be understood as an explicit or implicit assurance of a particular price development of the financial instruments mentioned or as a call to action. The purchase of securities involves risks that may lead to the total loss of the capital invested. The information provided does not replace expert investment advice tailored to individual needs. No liability or guarantee is assumed, either explicitly or implicitly, for the timeliness, accuracy, appropriateness or completeness of the information provided, nor for any financial losses. These are expressly not financial analyses, but journalistic texts. Readers who make investment decisions or carry out transactions based on the information provided here do so entirely at their own risk. The authors may hold securities of the companies/securities/shares discussed at the time of publication and therefore a conflict of interest may exist.
