With President Donald Trump's tariffs on most of the world wiping out $9.5 trillion in stock market value over three days, advisors are fielding questions from spooked clients about how to position their portfolios.
Over the weekend, Trump defended the tariffs, stating: “What’s going to happen to the markets, I can’t tell you,” The Wall Street Journal reported. “I don’t want anything to go down. But sometimes you have to take medicine to fix something.”
Andrew Mescon, CEO of Ballast Rock Private Wealth in Charleston, South Carolina, said that the majority of his firm's clients' concerns "have been focused more on the long-term implications of the administration's new tariff policies, rather than on mitigating losses during the current market selloffs."
We caught up with Mescon to dig deeper into how he's helping clients navigate the current market turmoil.
THINKADVISOR: What is the top question your clients are asking now about the markets and their portfolios — and what are you telling them in response?
MESCON: As a firm, we tend to incorporate private market investments into our asset allocation strategies more than most of our industry peers. Given that these investments have less exposure to market risk than public securities do, most of our clients have been relatively insulated from the worst effects of volatility being reflected in public markets over the past few days.
At this point, it's still way too early to determine the long-term impact of the proposed tariff policies. Markets despise uncertainty and are capable of reacting very quickly to new developments well ahead of our ability to receive and process all the information necessary to make sound investment decisions.
As such, we are encouraging our clients to remain disciplined in their approach, and to trust in the overall investment plan we've established together. By focusing on diversification, maintaining a long-term investment outlook, and staying informed, we believe our clients are well positioned to weather volatile market environments like these.
If your client wants to sell high-risk equity assets and you both decide to do so, what are you specifically going to move the client's assets into?
Since each of our clients has their own unique risk tolerance, time horizon, and investment objectives, it's critical for us to ensure that the guidance we provide is tailored to each client's specific needs.
Furthermore, assuming that our clients have been properly allocated thus far, based on the aforementioned considerations, it's unlikely that we would be recommending any broad sweeping changes to portfolios at this time.
That being said, we have found buffered ETFs to be a popular tool for clients who are interested in mitigating risk while still maintaining a relatively disciplined long-term investment approach.
These publicly traded, daily liquid securities provide investors with access to various market indices but with varying degrees of downside protection (typically between 10-30%) in exchange for accepting a cap on the upside.
In practice, we have been layering these securities into our client strategies over the past six months in anticipation of a potential correction of sorts, so it's actually an asset class that most of our clients are already familiar with.
Pictured: Andrew Mescon
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