Saxo Markets
Summary: In today's global markets, geopolitical and economic risk are ever-present. To protect your portfolio, you'll need a strategy that defends against those risks. For many traders, multi-asset trading is becoming their tool of choice, not only to mitigate risk but also to capitalise on the markets' volatile movements.
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Interesting times
The ancient Chinese curse “May you live in interesting times” has probably been on every trader’s mind during 2019. The impact of the US-China trade war on financial markets has been considerable, wreaking havoc on the tech, auto and agriculture sectors. In May 2019, when the US announced it was increasing tariffs from 10% to 25%, the S&P and the Dow both fell over 2% over the following week. The damage was even higher for the tech-heavy Nasdaq, which fell more than 3.3%.
And it’s not just the US markets being jolted by economic and political events. The trade war waves have reached Germany, where weaker demand for machinery and cars has seen exports decline, while the UK is still being rocked by the fall-out from Brexit, causing significant volatility in the British pound.
Risk mitigation through diversification
While economic uncertainty is seemingly becoming the new normal, pursuing a diversified trading strategy through multi-asset trading is a way for traders to mitigate unsystematic risk. More specifically, by diversifying not only across sectors and geographies, but also across asset classes such as stocks, bonds, commodities and currencies, investors can reduce asset-specific risk and smoothen out the overall volatility within their portfolios.
Tactical asset allocation
The basis behind tactical asset allocation is the assumption that certain asset classes, sectors, or geographies perform better during different stages of the macro-economic cycle. Therefore, it is critical for investors to identify the asset classes, sectors or markets that relatively outperform in each stage. As such, tactical asset allocation is an active trading strategy that advises investors to adjust the composition of their portfolios in order to take advantage of cycle-specific price fluctuations across sectors, markets and asset classes. Read our analysis on which sectors to be overweight during recessionary markets.
As a pioneer in multi-asset trading, we early on identified the benefits of trading across asset classes, sectors and geographies. Today, Saxo provides access to more than 35,000 tradable instruments through our award-winning trading platform: SaxoTraderGO.
Try SaxoTraderGO now and explore multi-asset trading. No signup required.
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.
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