When Donald Trump was first elected in 2016, I said that whatever else he did, he would surely build things. His background in real estate and his fondness for grandiose plans seemed to make it a certainty. History shows that he did not: it was only under Joe Biden that America began a major infrastructure programme. Whether many of these projects carry on under Trump or get cancelled for other priorities will soon be seen but, in any case, it was a lesson in the difficulty of predicting what governments will achieve.
That’s why there are no changes to make to the MoneyWeek strategic ETF portfolio, just as there would have been none had Kamala Harris won. The aim of the portfolio is to do okay in all likely scenarios, rather than take big bets on any one outcome. That doesn’t mean that it will look the same in a year’s time, but we are not rushing to change our bond holdings on the basis that Trump will bring bigger deficits and higher yields.
What's in the MoneyWeek ETF portfolio today
Still, this is a good time to recap what ETFs we hold and why. We use Invesco US Treasury Bond 0-1 Years GBP Hedged as a proxy for risk-free cash, although in practice, anybody following this portfolio probably uses anything from cash savings accounts to money market funds. Ideally, we would use a very short-term UK government bond fund, but no such ETF exists, so we use US bonds and hedge the currency exposure.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Conversely, the use of iShares $ Treasury Bond GBP Hedged is a deliberate choice over similar ETFs for UK government bonds – US government bonds are the global safe-haven asset in times of trouble. We hedge because we do not want to complicate this position with short-term currency volatility. We hold iShares $ TIPS for US inflation-linked bonds, rather than UK inflation-linked bonds, because the UK market is distorted by heavy buying from pension funds and US yields are more attractive. We do not hedge the currency here, because this is intended to protect against long-term inflation risks. If UK inflation is especially bad we’d expect sterling to continue its long-term decline against the dollar.
We hold an equal amount in each of our core equity positions: Vanguard S&P 500, Vanguard FTSE Developed Europe, Vanguard FTSE Japan and iShares Core MSCI Emerging Markets. This is a long way from their global weights (the US is 65% of the MSCI ACWI) and reflects their valuations: the US deserves to be more expensive than most other markets, but the gap remains very wide and the reliance on the tech sector to keep the bull market going increases the risks.
Real-estate stocks struggled after the pandemic, but iShares Developed Markets Property Yield has started to perform a bit better this year, largely due to the prospect for interest-rate cuts. Last, SPDR MSCI World Energy and iShares Physical Gold are here to buffer the portfolio against inflation and shocks. The latter has been doing that job well as the gold price hits new highs. The oil price has softened, but the unloved oil majors are still profitable at these levels, while offering some protection against an energy crisis in an increasingly volatile and dangerous world.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Top 10 locations for buyers and renters revealedLondon is crowned as the most popular location for renters and buyers, despite rising costs. But where else are house hunters heading to?
-
Making financial gifts to loved ones? Write it down or risk giving an IHT bill tooGiving gifts can be a way to pass on wealth and reduce the inheritance tax bill on your estate but do it wrong and you could leave family and friends more than they bargained for.
-
Leading European companies offer long-term growth prospectsOpinion Alexander Darwall, lead portfolio manager, European Opportunities Trust, picks three European companies where he'd put his money
-
How to harness the power of dividendsDividends went out of style in the pandemic. It’s great to see them back, says Rupert Hargreaves
-
Why Trustpilot is a stock to watch for exposure to the e-commerce marketTrustpilot has built a defensible position in one of the most critical areas of the internet: the infrastructure of trust, says Jamie Ward
-
Tetragon Financial: An exotic investment trust producing stellar returnsTetragon Financial has performed very well, but it won't appeal to most investors – there are clear reasons for the huge discount, says Rupert Hargreaves
-
How to capitalise on the pessimism around Britain's stock marketOpinion There was little in the Budget to prop up Britain's stock market, but opportunities are hiding in plain sight. Investors should take advantage while they can
-
London claims victory in the Brexit warsOpinion JPMorgan Chase's decision to build a new headquarters in London is a huge vote of confidence and a sign that the City will remain Europe's key financial hub
-
Reinventing the high street – how to invest in the retailers driving the changeThe high street brands that can make shopping and leisure an enjoyable experience will thrive, says Maryam Cockar
-
The consequences of the Autumn Budget – and what it means for the UK economyOpinion A directionless and floundering government has ducked the hard choices at the Autumn Budget, says Simon Wilson
