Ray Dalio, who founded Bridgewater Associates, noticed that global central banks are diversifying away from U.S. assets. Investors might do the same.
Dalio said several examples supporting this claim. Gold prices rose by 67%, lifted by the strong demand from central banks. He suggested that investors should pay more attention to monitoring the capital war. Instead of following the trade war, which uses tariffs as an instrument, the capital war mattered more.
The White House Administration threatened to take Greenland. Late last week, however, the “framework deal” ended the tensions. Unfortunately, the threat raises Europe’s distrust of the U.S. It sets the stage for more threats of military moves for the U.S. to acquire any territory.
Investors should continue to hold defense and aerospace stocks. Companies such as Lockheed Martin (LMT), L3Harris (LHX), RTX, Boeing (BA), Aerovironment (AVAV), and Kratos (KTOS) are on the list. KTOS stock is not yet a compelling investment at these levels. Valuations are at a premium because markets are pricing in the risks of further U.S. aggression against other countries.
This week, the Federal Reserve will announce its rate policy. Markets expect it to hold rates. This might not matter. The world is increasingly losing trust in U.S. markets. That would suggest that investors lower their exposure to firms that rely on growth in U.S. markets. That includes Apple (AAPL), Visa (V), Tesla (TSLA), and Broadcom (AVGO).
