New research suggests that investors were concerned over impending trade wars even prior to President Donald Trump’s announcement on tariffs in April.
The findings, from State Street Global Advisors’ ETF Impact Series, surveyed investors on risk management attitudes and behaviors. It found that 55% of investors felt informed about the risk to their portfolios prior to Trump’s announcement, and 47% of self-directed investors even admitted to feeling worried about market conditions prior to Liberation Day. This was compared to 44% of advised and 37% of hybrid clients who felt the same.
Further, tariffs and trade wars were perceived to be the biggest risk to portfolios in the coming 12 to 18 months among all investor types surveyed.
“As the market absorbs tariff impacts and ongoing uncertainty, questions around risk, diversification, and access to liquid, flexible investment tools are front and center,” said Anna Paglia, chief business officer at State Street Global Advisors, in a statement. “Our research addresses key questions about portfolio resilience.”
Investors are utilizing exchange-traded funds (ETFs) to protect investments from market volatility, State Street findings suggest. Sixty-five percent of investors with over $250,000 in investable assets agree that the funds help improve overall performance, up from 59% in 2022. Sixty-two percent of investors also believe that using ETFs has made them a better investor, another increase from 54% last year.
Financial advisors, on their part, are reducing exposure to public markets and creating alternative sources of return by using alternative investments or working with cash.
According to the research, half of financial advisors are “allocating to alternative investments/strategies,” to manage portfolio risk, while nearly the same number (47%) are “increasing allocation to cash or cash equivalents” and/or “performing diversification across asset classes.” Seventy-nine percent “plan to increase their allocation to alternative ETF strategies” over the next year, further growing alternative ETF assets under management from $27.58 billion in 2022 to an expected $148.81 billion by the end of 2024.
Another driving factor towards the push for alternative investments is investor demand, especially among younger working groups, State Street reports. According to the research, 69% of Millennials want to invest in alternatives, compared to 56% of Gen Xers and 46% of Baby Boomers.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.