After the US imposed sweeping tariffs on imports, causing volatility across asset classes, US asset manager PineBridge Investments shared its latest insights on navigating investments during periods of peak uncertainty, offering a cross-asset class perspective.

In an uncertain environment, PineBridge Investments thinks that investors need to be more diversified across asset classes, industries, and global geographies. While some level of security selection risk is unavoidable, investors should try to avoid excess market risk in either direction.

PineBridge highlighted that the new US tariffs are at a trade-weighted average of roughly 18 per cent, with a high tariff on China creating a near embargo, significant rates on Canada and Mexico, and around a 10 per cent average for the rest of the world.

While a soft landing for the economy remains the firm’s base case, PineBridge sees a 40 per cent chance for a mild recession. The policy response is also uncertain, and the shock means that fiscal and monetary offsets may not arrive soon enough to sidestep a downturn.

The US Federal Reserve remains in “wait and see” mode despite overt pressure from Trump to cut rates. That said, PineBridge expects that by early 2026, the US economy will have slowed and price levels will most likely have adjusted after a one-off spike in inflation, enabling the Fed to be more dovish. Given these considerations, PineBridge projects that the Fed will cut its policy rates three times over the next 12 months to 3.75 per cent and set its US 10-year rate forecast at 4 per cent.

The outlook for the euro area is far clearer. Despite the lack of full clarity on tariffs, their impact implies weaker growth and disinflation, and PineBridge’s European Central Bank (ECB) policy rate forecast is 1.5 per cent.

Diversification
The firm said US assets are losing their shine – a weakening dollar and fading US exceptionalism favour broader global diversification. The euro benefits from Europe’s better policy mix, along with higher potential growth in Germany from 2026 onwards.

PineBridge said it thinks that global diversification is especially critical. US credit, and its underlying fundamentals, have long been viewed as superior, but the differential over other major econonies is shrinking – because of that, and given the current heightened uncertainty, PineBridge would not favour being overly weighted to the US.

“We are now more constructive on the European outlook, given that the Trump administration is forcing Europe to rethink its fiscal expenditures on both military and infrastructure, especially in Germany,” the firm said.

Europe could also benefit from some form of forced collaboration on trade issues and spending, leading to a more positive outcome despite some short-term pain. “Parts of emerging markets are also on a solid footing, with the vast majority of emerging market corporates having fairly minimal exposure to trade to the US. Notably, the banking sector across emerging markets is generally well-positioned to withstand downside risks in the global economy and, while rate cuts have reduced profitability, these cuts factor into a stable economic outlook that supports loan quality and liquidity across the system,” the firm continued.

PineBridge also believes recent volatility shows that Asian US dollar credit may be an interesting alternative to US and European fixed income, particularly in a drawdown environment.

In equities, the firm believes that European defence stocks face a rejuvenated decade ahead, given the removal of Germany’s debt brake and the need to provide the primary layer of defence in the future. In the US, reshoring provides stepped-up opportunities over a multi-year period for select industrial stocks. In China, the internet sector has government support again, and companies are no longer worried about expanding margins and investing in their business.

In fixed income, PineBridge favours shifting a portion of one’s duration exposure to Europe, particularly gilts. “We came into this year favouring mostly developed market sovereigns and some Asian high yield. Credit spreads have now widened everywhere, so it’s timely to nibble selectively elsewhere,” the firm said.

In alternatives, gold was already benefiting from deteriorating economic relationships and rising geopolitical risks. Should the US and China fail to reach a détente, China’s next step beyond today’s stimulus could be much more aggressive growth in the central bank’s balance sheet.

In this era of peak uncertainty, PineBridge believes that investors should seek active management that takes a longer-term view while also remaining watchful for volatility-driven opportunities.