Investors should focus on building portfolios that are resilient and adaptable, rather than reacting to headlines, amid the ongoing tariff-induced market volatility, according to St. James’s Place CIO, Justin Onuekwusi.

Onuekwusi noted that these portfolios would require a stronger emphasis on diversification, not just across asset classes, but by geography and investment themes too.

“The US market has been showing signs of being expensive for some time, well before recent trade tariff announcements rattled markets,” he continued.

“Over the past year, we’ve reassessed our equity exposure and reduced our allocation to US equities, where much of the recent performance has been driven by a narrow group of large-cap tech stocks.

“Given the size of the US market globally, maintaining an allocation to US equities remains prudent, however we believe an underweight position is warranted as valuations remain elevated.”

Onuekwusi stated that investors may instead look towards markets with broader-based growth and more attractive valuations, such as the UK, EU, and Japan.

He argued that the UK equity market was undervalued, trading at a ‘notable’ discount compared to global equities, presenting an opportunity for upside through mean reversion.

Furthermore, while there are concerns over the UK’s economic health, Onuekwusi noted that UK-listed companies “benefit from strong global diversification, solid dividend yields, and exposure to defensive sectors, making them appealing for long-term investors”.

Japanese small and mid-cap stocks were also cited as compelling investment opportunities, especially due to their focus on the domestic market, strong balance sheets, and relative insulation from global trade frictions.

“Increasing exposure to inflation-linked government bonds, such as TIPS, is another strategy that investors could consider to hedge against sticky or elevated inflation and provide downside protection in a slower-growth environment,” Onuekwusi said.

“Value investing is also looking increasingly compelling - particularly as many cyclical and industrial stocks remain inexpensive relative to their fundamentals. If inflation proves sticky and interest rates stay elevated for longer, the rotation from growth to value could have meaningful upside.”

More broadly, Onuekwusi urged investors to assess how long-term themes are reshaping global capital flows, as they can offer valuable context for funding areas with long-term growth potential.

“While we're not advocating for a retreat from the markets, now may be a strategic opportunity to reassess portfolio positioning, identify where the risks within your portfolio lie, and take steps to strengthen for greater resilience,” he added.

“The goal is not to predict the next market move, but to build portfolios that can adapt to uncertainty and remain positioned to seize long-term opportunities.”

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