LONDON, Jan 28 (Reuters) - Amid fluctuations in the Euro and U.S. dollar caused by President Trump's tariff threats, investors are turning to assets such as the Japanese yen and European credit to shield themselves from market volatility.
Market enthusiasm for Trump's pro-growth policies has waned, leading to turbulence in oil prices, Canadian and Mexican currencies, and unsettling Treasuries. Investors are now seeing the new administration as a potential source of risk.
Amelie Derambure, senior multi-asset manager at Amundi, Europe's largest investor, stated, "There will likely be more volatility in the U.S. dollar and across many other assets." Derambure has adjusted her funds by investing in inflation-linked bonds and European corporate debt to mitigate the impact of tariff-induced consumer price hikes and potential euro zone rate cuts.
Following a sharp decline in Nvidia driven by concerns over AI cost reduction, U.S. markets are bracing for further unrest.
Since the U.S. election on Nov. 5, U.S. inflation index-linked bonds have yielded approximately 1.5%, while U.S. Treasuries have dipped by 0.4%.
The yen reached a five-week high against the dollar on Monday after the last Friday's interest rate hike. Russell Investments' Van Luu noted the yen's resilience against tariff shocks, contrasting with the euro and Swiss franc weakened by rate cuts.
Concerning European credit, Societe Generale's Alain Bokobza recommended purchasing the yen and highlighted its support from the Bank of Japan.
Bank of America reported a trend of investor capital inflow into high-quality European corporate credit funds for 23 consecutive weeks.
Robert Griffiths, global equity strategist at Legal & General, favored European stocks and the UK's FTSE 100 if the U.S. tech slump continues. He also increased euro holdings in anticipation of a possible dollar decline.
Amid uncertainty about Trump's policies, TwentyFour Asset Management's Gordon Shannon favored bonds issued by domestically focused European banks, utilities, and telecoms for their stability in interest payments.
Derambure emphasized the importance of preserving a balanced portfolio, utilizing derivatives to hedge against potential market declines. She concluded, "But at the end of the day everything is exposed to some degree, and there is no one asset that is completely safe."