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STICK WITH YOUR KNITTING AS IT'S NOT BUSINESS AS USUAL

With no real way to predict U.S. trade and tax policies, Wilmington Trust's chief investment officer Tony Roth explained in a recent interview with Reuters why his firm has a neutral stance.

Roth typically watches the market's view on the economy and takes the opportunity to invest if the market is out of line with his firm's economic expectations.

But Wilmington has had to "move away from that approach of investing, because the market is so uncertain around what direction policy will take on two critical levels, both tariffs and overall spending," according to the money manager.

"Markets are really discounting any significant negative implications from those two issues right now: from the tariffs and the size of the government debt load," he said.

"Normally, we would say, well, the market's wrong ... But that would be the wrong thing to do right now, because the policy direction could change on a dime," Roth added as he pointed out that there is no way of knowing where the U.S. will land on tariffs and spending.

"So, we pretty much have our heads down and we're neutral across our allocation," he said.

Roth favors large cap U.S. equity over small caps and prefers the technology and financials sectors over the rest.

"But we're not overweight. We're not underweight risk. We're not overweight or underweight US versus non-US, because those calls are so dependent on the direction of policy," said Roth.

If President Donald Trump's tax and spending bill, approved in the House of Representatives, succeeds in the Senate, Roth worries about rising U.S. government debt obligations.

Hardline conservative Republicans in the U.S. Senate have also been voicing opposition to the tax-cut and spending bill as they pushed for deeper reductions in U.S. spending.

The nonpartisan Congressional Budget Office estimates the bill, which also boosts military and border security spending -- would add ~$2.4 trillion to the $36.2 trillion U.S. debt pile. And the nonpartisan Committee for a Responsible Federal Budget says that including interest payments the cost may rise to $3 trillion over a decade or $5 trillion if temporary tax cuts become permanent.

"Anybody who tells you they know what the Senate is going to do with this bill would be lying because they don't know. And anybody who "knows" where tariffs are going to settle would be lying because they don't know," said Roth.

"The markets are assuming, as it's happened in the past, that we get a big back-off on tariffs, and we get a big back-off on the level of debt that we're seeing in the big, beautiful bill," said Roth.

"If we don't, we're going to have a different market," said the money manager who is advocating caution as a result.

"As an investor, you really need to either be very bold and potentially imprudent or you need to just stick to your long-term knitting. Stick to your plan," he said.

(Sinéad Carew)

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