Investors hunt for tariff-proof trades as new trade reality hits

NEW YORK, April 3 (Reuters) - Investors are looking at ways to ward off economic pain now tariffs are here, seeking assets that can ride out a recession and higher inflation or companies that rely less on international trade.

The S&P 500 has lost 7.7% since its post-inauguration peak hit on February 19 and could see more volatility, investors say, after Trump tariffs came in heavier than many on Wall Street thought.

Fresh uncertainty about just how far tariffs will eventually go is causing a hunt for protection and trades which offer a buffer.

"We have no idea where we're going to land, where we're going to be over the next three and a half years, with respect to tariffs," said Don Calcagni, chief investment officer at Mercer Advisors, who recommends private markets which avoid headline risk. "And so, for that reason, we think it's a market where investors should just remain cautious, stay very well diversified, and resist trying to be the hero."

Trades that could protect against the impact of tariffs include commodities, precious metals such as gold, value and defensive stocks as well as smaller companies and bonds.

"The moves that we've seen in markets so far are a function of flight to safety for the tariff-imposed risk or potential recession. Now we need to think beyond that," said Gustaf Little, a senior portfolio manager at Allspring. "There could be potential for an era of de-globalization from tariffs," he said.

Allspring's Little is on the hunt for small-cap firms that could benefit from protectionist policies, as they depend less on trade than large caps. He has added some positions like this in recent weeks.

Robert Christian, head of Absolute Return at Franklin Templeton said that as a hedge fund investor, he favors...
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