Alternatives high on the radar to escape Trump's tariffs: Fidante

Financial advisers are increasingly searching for alternative sources to capture alpha amid ongoing market volatility.

Surveying 174 financial advisers, Findante found that four in 10 advisers are now bearish on both US equities and Australian equities, predominately due to the US President Donald Trump's rapid fire of tariffs.

Advisers were also split in their views on how the markets will perform in the next six months; one in three (31%) expect Australian and the US market to bounce back, while 29% expect them to fall and 26% believe things will remain relatively unchanged.

However, since the survey was conducted in April, global markets have shown signs of rebounds, with indices such as the Nasdaq now trading above pre-announcement levels.

Yet, despite the rebound and the huge appetite in the US market for the past 12 months, as the market corrects advisers are looking to alternative sources to drive returns.

In the next six months, one in three advisers plan to increase allocations to global equity small caps (32%), while 31% on emerging markets equities (31%), and 30% on Australian equity small caps.

Alternative assets are also high on the radar, with advisers looking to increase allocation to infrastructure (29%), private equity (22%), and private credit (21%), Findante said.

There are an increasing number of high-net-worth (HNW) advisers shifting allocations to alternatives as HNW clients aim to diversify their portfolio, protect against inflation and delink returns from the public markets.

Fidante Affiliates general manager Evan Reedman said the markets have reacted strongly to the tariff announcements, forcing some advisers to pivot.

"This was an unexpected jolt, but advisers largely stayed the course with the majority expecting client allocations to Australian and US equities to remain steady as they assessed how volatility would play out," Reedman said.

"Markets have since rebounded and this instinct to remain disciplined has proven correct. It reinforces the value of financial advice in helping investors navigate market uncertainty and to ensure their portfolios are protected across market cycles."

Reedman believes now is the time active management and stock selection is going to "come to the fore."

"It is likely global macroeconomic and geopolitical tensions will continue and for investors that means navigating a period of ongoing uncertainty and volatility," he continued.

"Advisers have been quick to look further afield for pockets of opportunities - such as emerging markets, small caps, and private markets - that can provide both diversification and alpha to a client's portfolio."

In November 2024, Fidante's inaugural Adviser Markets Survey found advisers were most concerned about high equity valuations and inflation, but those fears have been overtaken, with one in two advisers (50%) now ranking Trump's economic policies and tariffs as their main concern.