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Global funds picking winners as US-China trade war losers emerge

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

It’s not every day that a London-listed small-cap company, which makes polymer-based materials used in all sorts of things from housebuilding and car making to roads and drains can legitimately - and without derision - blame the direct actions of the US president for a downturn in its fortunes.

Global funds picking winners as US-China trade war losers emerge

But when materials maker Low & Bonar warned on Monday that the US-China trade war was taking a toll on its results anyone who heard that is likely to have shaken their head in sympathy and pondered just how far-reaching the effects of this stand-off are increasingly going to prove to be.

That sympathy didn’t stop its shares plummeting, but there was little doubt that the dispute between the world’s two biggest economies had, as it described it, “created significant uncertainty in the Chinese market” and, as a result, the group said performance during the first half of the year would be “materially behind that of the prior half year”.

It did not give specifics, but it turned in a pre-tax loss of £13.2 million on the back of revenue of £206.2 million in the six months to May 2018. And announced that chief executive Philip de Klerk would leave the company on 1 July, citing a need to “accelerate delivery of the transformation programme initiated in late 2018”.

The US-China trade war is far from over; in fact it’s escalating by the day, with Chinese telecoms giant Huawei’s inclusion on the US’s so-called entity list already having negative knock-on effects.

According to reports by news agency Reuters, Huawei, one of the 44 Chinese entities subject to US export controls on the basis that they pose a “significant risk” to US national security, has had the delivery of key software and technical services from Google to it suspended.

Google, which apparently last year shipped more than 200 million units to Huawei has said it is suspending business. Huawei is reliant on Google’s Android operating system for its smartphones and analysts at Citi have said the potential software ban “could paralyse Huawei’s smartphone and equipment business”.

There’s no doubt that the escalation of hostilities between the two countries is showing clearly how powerful - and at the same time - vulnerable global business is to major disruption when previously amicable relations turn sour.

How and when it will eventually be resolved and whether there will be a victor or just an eventual resolution at the end of a chain of ill effects remains to be seen, but it also demonstrates the need to stay diversified as an investor - especially during times of potential volatility.

The world of business and investment is played out on a global stage and a well-diversified portfolio should reflect that. Investing in a global fund gives you exposure, but also most importantly, the insight of the manager running the fund. Their job is to analyse and act on events as they unfold, a task which a ‘lay person’ is rarely as well-equipped for as an experienced fund manager.

The events unfolding around the US-China trade war are far-reaching and potentially damaging. But they, of course, also offer opportunity. Where that opportunity lies may be difficult to determine right now. But the world’s most-experienced fund managers will be poring over events as they unfold and positioning their portfolios to make sure they - and their investors - benefit.

The Select 50 list of our favourite funds provides a handy short-list of funds across multiple asset classes and geographies. For investors who prefer to manage their own asset allocation and to choose their own preferred fund managers, this is a great starting point. 

If you are less confident, or simply want someone else to do the work for you, the Fidelity Select 50 Balanced Fund is a one-stop alternative to a DIY investment approach. The Fidelity Select 50 Balanced Fund is managed by Ayesha Akbar, one of our most experienced fund-of-fund managers. She has been in charge of the fund since launch in February 2018 and has delivered a smoother ride than the overall markets in the past 15 months, although the past is obviously no guide to the future and the track record of the fund is still too short to draw any reliable conclusions.

Read more about the Fidelity Select 50 Balanced Fund.

Or explore our Select 50 list of our experts' favourite funds.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.