As US-China trade war rages, tips for protecting yourself from stock market volatility
U.S. stocks started to rebound on Tuesday from their worst loss of the year after China took steps to stabilize its currency, staving off the imminent possibility of a currency war between the world’s two largest economies.
One day after the Dow Jones Industrial Average shed 2.9 percent, stocks bounced around before eventually stabilizing mid-afternoon. The market selloff began on Monday, pushing U.S. indexes 3 percent lower — a drop precipitated by China allowing the yuan to depreciate against the dollar to the lowest level in years.
Although China stabilized its currency on Tuesday, tensions between Beijing and Washington remain the highest they’ve been in months. But for investors losing their appetite for a risk-filled market, there are ways to shield themselves from some of the ongoing volatility.
“Investors also need to think about risk, given the volatility, to ensure that they’re positioned accordingly, whereas they’re not taking too much risk, that they can actually handle when there is volatility,” Matthew Miskin, the co-chief investment strategist at John Hancock Investment Management, told FOX Business. “Because volatility very well may persist in the near-term.”
One of Miskin’s top picks is stocks tied to infrastructure because the firm believes that globally, governments will begin spending more cash on infrastructure.
He also advised looking past stocks that could be affected by uncertainties, “and to be less economically sensitive, less susceptible to trade concerns and tariffs. They tend to be boring businesses that pay dividends.”
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That includes avoiding technology stocks — they lead the way down, but also the way up, Miskin said — if you can't stomach volatility.
"But to us, you kind of want to selectively trim out places that are higher-risk, higher-returns parts of the market, and reallocate into more defensive, kind of more steady, stable businesses, like infrastructure for example," he said.