This news service talked to chief investment officers at wealth managers to discover what they think so far about the new US administration's impact on the sort of asset allocation and portfolio positions they want to take, and why.

Amidst the head-spinning turbulence in Washington created by the Trump administration in the past few weeks, tariff policy emerged as the most concerning, and potentially consequential, for wealth management investment officers charged with overseeing client portfolios.

While controversial attempts to restructure the government are unlikely to have a material impact on investment decisions, deregulation, new government policies, and legislation present abundant opportunities for owners of significant private capital, the wealth managers said.

CIOs surveyed by Family Wealth Report generally agreed with a recent JP Morgan Chase survey showing that traders believe changes to US. tariff policy will significantly increase market turbulence and volatility.

“The uncertainty of the administration’s long-term objectives and the means by which they intend to use tariffs to accomplish them,” were likely to impact volatility, Sam Fraundorf, chief investment officer for Diversified Trust Company, an Atlanta-based private trust company, said. 

Since the US presidential election was decided in November, Diversified has consistently told clients it expects “volatility to rattle equity and currency markets,” Fraundorf said. “While the dollar and US stocks will not be immune, we believe they will fare better.”

Inflationary or distraction?
Implementing broad tariffs may cause inflation to increase, according to TAG Associates president Jonathan Bergman. As a result, TAG has kept duration low on fixed income investments, he said. 

Trump “may be using tariffs as a distraction to advance other interests,” Mark Thomas, CIO for Greycourt & Co in Pittsburgh, said. “If tariffs are actually imposed, they will diminish the attractiveness of investments in international markets where growth is already fragile.” 

Trump’s tariff’s policy “is a problem of sequencing, not direction,” according to Jason Blackwell, chief investment strategist at Focus Partners Wealth, noting that the market is dealing with “very messy negotiations” that are taking place in public in real time.

If tariffs were the new administration's entire agenda, “we'd be more concerned,” said Blackwell. “However, we're still looking for additional regulatory relief and a tax plan to stimulate growth.”

Eyeing opportunities 
A reshaped regulatory and federal policy landscape also presents ample opportunities for high and ultra-high net worth investors, especially in private equity and credit, according to wealth managers.

“Infrastructure, private credit, and AI-related private equity offer strong opportunities, especially in sectors benefiting from policy support and technological advancements,” David Damiani, CIO for Balentine in Atlanta, said.

Private credit, private equity and real estate are investment priorities for Brighton Jones, a 100 per cent employee-owned RIA based in Seattle.

“In private credit, we want to be in a senior secured, first lien position,” Brighton Jones CIO Brian Tall said. “Alternatively, we want to avoid pay-in-kind and covenant-light debt. In private equity, we favor managers who have demonstrated their ability and willingness to roll up their sleeves to add value to underlying portfolio companies. In real estate, we are similarly looking for resiliency in sectors that exhibit cycle-resilient demand derived from demographic trends as well as characterized by short-term leases allowing re-pricing and better hedging in inflationary environments.”

Diversified is “looking to find pockets of opportunity in areas like private equity, private credit, high coupon fixed income and diversifying strategies,” Fraundorf said. “We are slowly rotating from growth to more principal preservation at this point in the cycle.”

Reshaped environment
The reshaped regulatory environment “will spur increased M&A activity,”  Bergman said. 

“The FTC will be more willing to allow deals in all industries,” he said. “Interest rates have stabilized. Private equity firms have both companies to sell and capital to deploy. Many small public companies trade at discounts to earnings compared to their large cap brethren who have relatively better stock valuations. This should benefit smaller companies, existing private equity holdings, and merger arbitrage strategies.”

As venture capital prices have cooled in the last two years, Pathstone sees opportunities “in sectors outside of artificial intelligence which has attracted the most capital recently,” said John Workman, managing director at the multi-family office. “In the growth/buyout space, strong operators will be key as interest rates are no longer the free lunch they once were.”

Focus Partners Wealth finds energy “very attractive” for private capital, Blackwell said, “but we're concerned that too many investors aren't thinking about the commodity price impact if the administration is successful in boosting domestic supply. We want to our capital to be pulling the oil and gas out of the ground and take our profits from the volume.”

Client concerns
Despite the torrent of headlines and ensuing controversies emanating for the Trump White House, most clients are optimistic about their portfolios, according to wealth managers.

Two years of large US equity returns has most investors at Diversified “feeling pretty good,” said Fraundorf. “There seems to be some confidence in the ability of the new administration to make effective change, which tends to be the case with the start of most new administrations. We admit, this is much different than most transitions.”

TAG ’s clients are of two minds, according to Bergman. “Some clients are excited by the increased business confidence and animal spirits taking shape,” he said. “Others are worried about market whipsaws due to government announcements.”

The new administration's effort to curtail government spending “will be welcome by investors,” Brian Andrew, chief investment officer for Merit Financial Advisors, said. “However, lack of bipartisan support will increase volatility in the bond market as interest rate rates and bond investors react day-to-day around this news. Still, there is a great opportunity for investors in the one-to-five-year maturity part of the bond market.”

Some Balentine clients are concerned about policy uncertainty, inflation, and Federal Reserve policy, said Damiani. 

But sentiment “generally follows market price action rather than the other way around,” he pointed out. “By refocusing clients on long-term growth and insulating cash needs from short-term market volatility, they typically find these worries subside relatively quickly.”

At Greycourt, some clients have expressed interest in taking advantage of cheaper valuations outside of the US, especially in Europe. 

“We are debating this internally,” said Thomas. “Valuations tend to ultimately matter, and European companies are buying back their own stock given the lower valuations, but the regulatory overhang constraining growth is both real and substantial.”