Whilst the next formal meeting of the Gaia Investment Committee is just two weeks away, we have decided to make some changes to the portfolios now. Conversations amongst committee members have been ongoing throughout the highly volatile period since Donald Trump announced his ‘reciprocal tariffs’, as the modest overweight with which we entered the year became a headwind for performance as his attempts to remodel the entire global trading system caused markets to sell-off sharply.
The committee was cognisant of the need to ride out the short-term volatility to avoid being ‘whipsawed’ (selling an asset that has fallen in price and then missing out on the rally that follows). Furthermore, trading in volatile markets is difficult, and the few changes that we have made in recent weeks have only been actioned where we have been able to find a high margin of safety. However, the committee decided to make some more meaningful changes now for two reasons:
- Volatility is much lower than it was, so the risk of being ‘out of the market’ for the few days between selling one fund and buying another is much reduced.
- With the portfolios having recovered to roughly where they were at the start of the year, whipsaw risk is much reduced.
As a result, the committee decided to move to a neutral position on equities. There was a discussion about going a step further and going underweight, as there remains a high degree of uncertainty, and the fact that equity markets are at similar levels or higher to the start of the year is questionable. In particular, there was discussion about whether or not US equities was an area in which we should further reduce exposure, as there is significant commentary around investors exiting US assets. However, it is US equities that have led the recovery that we have seen in recent weeks, so the committee was undecided about the merits of making such a move at the moment. Therefore, it was agreed that a neutral stance felt like a reasonable position for now, but the conversation remains ongoing and our positioning may well change in the near future as further data becomes available.
