A domestic focus mitigates tariff risks

As economic uncertainty and market volatility persist over the short to medium term, it’s important to focus on company fundamentals and the long term, says Murdo MacLean, client investment manager at Walter Scott & Partners.

“Investors are now trying to ascertain the winners and the losers from the initial picture that’s been provided by the White House,” he said in an April 3 interview. “As long as there’s not perfect clarity about tariffs, and the shape of, potentially, the U.S. and global economy over the … short to medium term, then volatility is likely to persist.”

Listen to the full conversation on the Advisor to Go podcast, powered by CIBC Asset Management.

In a period of heightened volatility, MacLean suggested positioning portfolios around companies that have a domestic focus, as well as those in growth markets like technology, healthcare, industrials and certain pockets of the consumer space. The key is to know the fundamentals of those companies, he said.

“Understanding how they plan to deal with potential pot holes in the road,” he said, “and whether or not they have pricing power, which will allow them the flexibility to pass on additional costs due to tariffs, and other sort of factors.”

Also, he suggested, look to companies with the financial robustness, clean balance sheets and the kind of cash flow dynamics that will allow them to take quick decisions.

In the technology space, he said, companies that can capitalize on the rollout of AI could provide value. For instance, he likes Adobe, which has a long history of rolling out software packages, he said.  

“The overall distribution infrastructure that they have should allow them to capitalize quite well on opportunities there,” he said.

In life sciences, MacLean suggested companies like West Pharmaceutical Services. “Their core business certainly looks like one that’s well-positioned in the supply chain for injectable drugs.”

Roche is another pharmaceutical company that he said is attractive and trading on multi-decade lows. “[The company] only requires a small amount of pipeline success to get that stock moving.”

One area in the U.S. that MacLean remains bullish on in the long term is industrials, including names like Fastenal, Ferguson, Copart and Old Dominion Freight Line. While these companies have been going through “a prolonged slump in their end markets, when those end markets begin to normalize, the valuations on these stocks provide very good entry points.”

MacLean said there are still plenty of opportunities for investors, even while the outlook for global equities remains uncertain.

“Being able to keep a cool head, focus on fundamentals and focus on the long term is the way that we believe will lead to the best investor returns over time,” he said.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.

Suzanne Yar Khan

Suzanne has worked with the Advisor.ca team since 2012. She was a staff editor until 2017 and has since worked as a freelance financial editor and reporter.