• Trump’s near assassination shows a risky political environment and adds to market uncertainty.
  • Michael Landsberg says the market could get even more unpredictable as the election draws closer. 
  • He recommends three trades to hedge risk in the face of political violence.

Investors were already concerned about the impacts of the November election on markets before last weekend. Now, the attempted assassination of former President Donald Trump has injected even more uncertainty into the US political landscape.

“We are entering some very unfamiliar terrain, which will be difficult to predict from a market perspective,” Michael Landsberg, the founder and CEO of Landsberg Bennett Private Wealth Management, said earlier this week. Landsberg has nearly three decades of experience in portfolio management and has been a Forbes top-ranked wealth advisor for the last six years.

Below, he provides three recommendations for managing your portfolio in the wake of this shocking event.

3 trades for political risk

First, cash remains king. The ongoing buzz about potential rate cuts has led many asset managers to recommend moving out of cash and up the yield curve in anticipation of lower yields on money market funds. Still, unprecedented political events like these prove that it's good to have some cash reserves.

"This weekend's developments was one of the reasons we have some cash on the sidelines and encourage our clients to always keep some cash stashed away," Landsberg said. It's not just the attempted assassination, though. Landsberg anticipates the overall political environment to become even more tense and, as a result, increasingly risky as the election draws nearer.

Cash is easily accessible and highly liquid, making it an ideal low-risk asset, especially since markets can freeze up in reaction to political uncertainty.

And for now, the Fed still hasn't clarified the next rate cut. "Having a little extra cash and getting paid roughly 5% on it is not a bad strategy until some of this dust settles," Landsberg said.

Although increased political uncertainty can increase the overall risk in the market, at the end of the day, high-quality companies with strong fundamentals will still perform, which is why Landsberg believes that investors should keep their faith in stocks. He believes that the financials sector and international equities will see more stability in a market with heightened risk.

The financials sector has performed strongly so far this year, and Landsberg believes it will continue to do so. Banks such as Goldman Sachs, JPMorgan, Citigroup, and Wells Fargo all beat earnings expectations with their most recent Q2 report, showing robust year-over-year growth. Goldman Sachs' CEO was particularly optimistic about the bank's investment banking division as transaction activity picks up after a post-pandemic slowdown.

Additionally, the financials sector can perform favorably even in an inflationary environment. Landsberg doubts that inflation will reach the 2% Fed target in the near future. He points to Chinese shipping rates, which have doubled in the last year, as a future headwind to lowering inflation. Within the financial sector, Landsberg recommends that investors allocate part of their portfolio to insurance companies, which can benefit from inflation by raising premiums.

Investing in international equities can also protect from the lack of market breadth in the S&P 500 right now.

"This historic level of concentration should give investors some pause," Landsberg said. While concentration isn't always a cause of concern, increased volatility due to political turbulence can lead market conditions to change quickly.

Index investors and those heavily invested in the Big Tech companies behind the S&P 500's rally have certainly done well this year, but there's the lingering question of how long the bull market can continue. Landsberg suggests that investors rebalance their portfolios to diversify their holdings and add holdings with more growth potential. Investors shouldn't shy away from investing overseas — Landsberg sees India and Japan as compelling growth areas. In fact, he believes these markets exhibit stronger growth than other areas of the domestic market. US small caps have been sluggish for almost four years.

Don't try to predict the Fed

Overall, Landsberg cautions investors against trying to time the market and predict the Fed's next move. The inflationary environment is difficult to predict, and as mentioned earlier, inflationary headwinds from global supply chain difficulties could make an appearance in late 2024 or early 2025. Additionally, housing costs, one of the stickiest areas of inflation, remain stubbornly high. Instead of trying to predict when Powell plans to cut, Landsberg recommends that investors look at corporate earnings this earnings season for a better understanding of whether stocks go up or down. Traditionally, companies that report strong EPS growth see strong stock performance.