The chief executive of Goldman Sachs Asset Management’s (GSAM) international division played down fears of a stock market correction despite concerns over international trade and hefty valuations.
“It seems a bit early to us to be concerned about a full-on, global meltdown in equities,” Sheila Patel told CNBC’s “Squawk Box Europe” Thursday.
“Are there valuation issues in equities? Certainly. Have we seen clients get more cautious in areas such as U.S. equities? Definitely. But have we seen full-scale fear come into the marketplace? No We are not poised for that crack in the market just yet.”
Patel’s comments come as global investors keep a close eye on President Donald Trump’s next move on international trade.
Withdrawing from trade deals and threatening import tariffs in order to protect and promote U.S. business, Trump has turned the status quo of global trade on its head. GSAM’s Patel said clients were looking to actively manage their portfolios to mitigate against potential upsets in global markets caused by trade disputes and potential tariffs, particularly in emerging markets (EM).
“We’ve seen clients both very active in EM debt and equities. In the latter, they’re focused on, and we’re focused on, more domestically-orientated stories and small and mid-cap (businesses). For example most of the Indian trade has been about Indian equities that are exposed to the growth in the domestic economy,” she said.
Brendan McDermid | Reuters Traders on the floor of the New York Stock Exchange.
“The things they’re avoiding and the things that people are worried about are big, global multi-nationals and their exposure to these kinds of trade tariffs,” she said.
The potential for a trade war between the world’s biggest economies, the U.S. and China, is the biggest concern for investors right now.
Trump unveiled plans for tariffs on a list of Chinese imports in March, including a 25 percent tariff on steel and 10 percent on aluminum. China promised to retaliate in kind, saying it would target products from the U.S., including soybeans, cars and whiskey.
GSAM’s Patel said the war of words over tariffs that are yet to be formally imposed by either side was actually not really affecting her clients.
“They’re saying ‘how big is the impact?’, ‘does it really matter?’, ‘what’s going on in the real economy?’ and when you get to it, $50 billion or $100 billion (in proposed tariffs), it’s a drop in the bucket relative to the size of the Chinese or U.S. economy,” she said.
“In fact, a 25 percent tariff on $100 billion of China trade is 0.2 percent of gross domestic product for China, so what does that mean?,” she said, adding that for emerging markets overall, only around 8 percent of EM revenue came from the U.S.