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.
Subscribe to 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.
-
UK passport renewal: cost, how long it takes – all you need to knowTravel The UK passport renewal process is going through some changes. Here’s everything you need to know to ensure your trip runs smoothly.
-
Gender pensions gap to take 20 years to fix unless ‘decisive action taken’Scottish Widows finds that - based on current projections - it will take until 2045 to bridge the gender pensions gap
-
Investment trusts could benefit from more optimismGive yourself an edge with investment trusts. Finding winning stocks is no mean feat.
-
Oil sector off the boil: what happens now?Oil giants BP and Shell are starting to struggle amid a glut of black gold. And growth in demand looks likely to slow
-
Improved prospects for income investorsIncome investors are raking in dividends, but it's not from the FTSE 100
-
Is Brevan Howard Macro a good investment?Holding Brevan Howard, a world-leading vehicle through an investment trust, offers diversification on the cheap
-
How can China boost consumption?China's new policies may give consumption a cyclical boost, even if long-term gains require more serious reforms
-
What is the outlook for oil prices?Oil prices will be set by the face-off between Saudi Arabia and US shale producers. Could tail risks change the possible outcome?
-
A fairer deal for investment trustsNew rules on how investment trusts report costs should ditch the idea that investors only need to look at one number
-
Top global fintech companies to invest inOne British fintech hogs the headlines, but there are two top performers in the US. We explain where you should put your money
