US stocks are trading lower (DJI, GSPC, IXIC) following reports of an Iranian attack on Israel, fueling investor concerns about geopolitical instability. Rob Haworth, Senior Investment Strategist at US Bank Asset Management Group, Joins Brad Smith at Wealth! to discuss how investors should position their portfolios amid increased volatility.

“What we have seen in the past with conflicts is that they tend to be short-lived. We’re trying to look through this and look at the opportunities that might arise if we see share prices soften a bit here,” says Haworth.

“The key question is what really happens to U.S. and global economic data after an attack or a continuation of this conflict, and here the epicenter may be with oil prices.” And we see oil prices rising, but they are always still at a fairly low level. If we think about where they were in the conflict last year before. So I think maybe the good news is that oil prices are not up yet, even though fear in these markets… has increased.”

The strategist says he “would view this more as an opportunity to expand, perhaps look at lower quality credits on the fixed income side, and then even within the equity portfolio, start to look at the areas where you’ve been trying to hedge.” “Improve your positioning. It’s a tough day for many of the more income-oriented sectors such as financials and industrials, but this may be an area to start looking for bargains should this sell-off extend a bit.”

Given the uncertainty surrounding the U.S. presidential election, Haworth says, “Our own work tells us that when it comes to the market and the economy, what really matters is, ‘How does this affect the economy?’ …The good news for the US.” For now, the story is still positive. We still see positive revisions for economic growth based on economists’ consensus expectations. The story is still one of solid economic growth slowing inflation, a Fed cutting rates and expected to be willing to cut rates.”

The strategist says: “The Fed’s move in September really rang the alarm bell for investors facing liquidity constraints that they now need to begin transitioning to what they expect from their portfolio strategy.”

He adds: “In the long term, we still believe there is significant value in technology and communications services, but this is more of a long-term proposition. The challenge right now is that valuations are high. In the short term, we are looking at income earners who may have had a harder time: finance, industry, perhaps not energy today, but certainly at some point.”

The story continues

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This post was written by Naomi Buchanan.