The investment Committee that runs our Gaia portfolios met on Tuesday.
Having made changes on the portfolios only a couple of weeks ago (see post of 19 May), the committee was generally happy with the portfolios and the funds held within them. However, there were two conversations that had remained ongoing since those recent changes, namely whether to go underweight equities and/or whether to reduce our US exposure.
On the first point, the committee decided to remain neutral on equities as a whole. Whilst there may well be increased volatility as we approach the end of the various 90 day pauses that President Trump has placed on many of his tariffs, a positive resolution in trade talks could be helpful to equity markets. With little ability to know that outcome, the committee felt that maintaining a neutral position overall was appropriate.
On the second point, the committee acknowledged the increased volatility in US equity market relative to others. The logic behind this development appears to be that Trump’s tariffs potentially effect 100% of US imports, but only a proportion of any other country’s exports. Therefore, US companies and consumers could be expected to feel more pain from his grand plan than those elsewhere. In addition, changes happening in Europe appear significant, from a potentially game changing decision by the German government to shake off years of fiscal discipline and invest heavily in defence and infrastructure, to NATO discussing new targets for defence spending not seen in may decades. The committee acknowledged the potential for such changes to stimulate economic growth in Europe. However, the sustainable part of the mandate under which we manage our Gaia portfolios means that they have a higher level of European exposure naturally than would otherwise be the case (and is seen on our Core portfolios). Therefore, the committee decided tay they were happy with the balance, and to make no changes.
Away from equities, we decided to retain our overweight to Absolute Return funds and our underweight to Fixed Interest, as the prospects for the latter remain uncertain in a world where tariffs could meaningfully increase inflation.
