How US and global fund managers are responding to the sell-off

Having enjoyed robust gains in recent years, investors have had a sharp reminder that the stock market is never without its risks and volatility.

While accommodative monetary policy, strong corporate earnings and the euphoria surrounding artificial intelligence (AI) have propelled the S&P 500 to record highs, the index has charted a wildly rocky course since President Trump’s so-called Liberation Day, 90-day tariff reprieve and the escalation into a full-blown trade war with China.

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Geopolitical tensions have reignited concerns over supply chains, inflationary pressures and the prospect of global recession.

As uncertainty surrounding US trade policy and tariffs continues to weigh heavily on sentiment, investors are once again navigating choppy waters. To help make sense of the road ahead, we spoke to five US and global fund managers willing to share the strategic shifts they’ve made – and their outlook for what’s next.

Mark Sherlock
Federated Hermes US Smid Equity
S&P 500 year-end target: 6,500

Mark Sherlock, head of US equities and manager of the Federated Hermes US Smid Equity fund, is the most bullish of those we spoke to, with a year-end target for the S&P 500 of 6,500 – up more than 10% on a closing level of 5,882 at the end of last year.

“While causing a lot of uncertainty and therefore market volatility, the majority of tariffs are likely to be short-lived, allowing President Trump to win concessions given the balance of power lies within the US,” he says.

“We believe the short-term behaviour of the market will settle over the course of the coming weeks as a clearer understanding of the policy backdrop materialises.”

He reckons the new administration’s pro-economy and pro-growth agenda will be supportive of US companies, particularly small and mid-caps – “the economic backbone of the US” – given their domestic focus.

The largest overweight positions in his portfolio are industrials and materials due to the expected tailwinds from Trump’s America First policy.

As the recent sell-off took small and mid-cap valuations to below their 10-year average and a 30% discount to their large-cap peers, Sherlock topped up his highest conviction holdings and initiated new positions from his watch list.

“In uncertain times, having a portfolio of cash-generative companies with strong balance sheets seems a sensible way to be positioned,” he adds.

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Mark Ellis
Nutshell Growth
S&P 500 year-end target: 6,100

As an ex-trader Nutshell Growth manager Mark Ellis is accustomed to anticipating market movements. He recalibrates the portfolio twice per month, a process prioritised during heightened volatility.

The concentrated quality growth fund has significant exposure to large-cap US tech. However, in March, amid escalating trade tensions between the US and Canada, its relative value approach identified more opportunities in Europe, reducing the US allocation to an all-time low of 58%.

On 11 March, when the Cboe Volatility Index, or VIX, spiked to an intraday high of 29.6, he identified European mid-caps – Swedish software company Fortnox AB (OMX:FNOX), Norwegian IT consultancy Bouvet and Germany’s ATOSS Software SE (XETRA:AOF) – as a “safe harbour”.

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During April’s sell-off, which saw the VIX hit 60.1 on 7 April, Ellis capitalised on knock-down valuations to add to Meta Platforms Inc Class A (NASDAQ:META), Adobe Inc (NASDAQ:ADBE), PayPal Holdings Inc (NASDAQ:PYPL) and MSCI in the US, as well as the world’s largest dedicated chip foundry, Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM). That took US exposure to 60% and technology to 51%.

“Looking ahead, we’re hopeful that negotiations will allow a broader alignment around the 10% minimum tariff with more exclusions,” he says.

Once the tariff shock subsides, Trump’s pro-business policies and a rate-cutting Federal Reserve should provide market support, he adds: “[That] will hopefully allow the S&P to grind back and finish the year around 6,100.”

In the event of increased escalation and a recessionary bear market, however, his expectation falls to 4,800.

James Thomson
Rathbone Global Opportunities
S&P 500 year-end target: 6,000

Rathbone Global Opportunities had more than 70% in the US at the end of February – and manager James Thomson has been using volatility to increase exposure.

“We don’t think this is the end of US exceptionalism given the extraordinary adaptability and resilience of US businesses,” he says. “We’ve used the weakness in global equity markets to increase our US exposure, adding a new technology name with another new holding coming shortly.”

These are outside the Magnificent Seven as the manager seeks to “inject balance and diversity” into the portfolio. “While we own five Mag 7 stocks – we don’t own Tesla Inc (NASDAQ:TSLA) or Meta – our combined exposure is approximately 12% compared to about 23% for global tracker funds,” he says.

Thomson reckons the most disruptive and least market-friendly of Trump’s policies – DOGE, deportations and tariffs – are being front-end loaded, with a more pro-growth agenda in the form of tax cuts and deregulation coming in time for next year’s mid-term elections.

“Trump knows that 60% of US households have exposure to the equity market, but as a deal maker he also knows he must create maximum pressure to extract trade concessions and declare victory,” he says.

His advice to investors is to “expect volatility and many reversals but avoid panic in this year of extremes”. His year-end target for the S&P 500 is 6,000, albeit there is “significant policy uncertainty” attached to his forecast.

Ed Kevis
Aviva Investors Global Equity Income
S&P 500 year-end prediction: Higher

Ed Kevis, manager of the Aviva Investors Global Equity Income fund, has been “patient and disciplined” amid the volatility and pleased with the downside protection his “core yield” and “mature yield” companies have provided.

While the fund primarily adopts a bottom-up fundamental approach, he is “geographically risk-aware” and has added selectively to US positions, reducing the underweight from around 24% at the start of the year to 20% today.

“Despite the negative start, we still expect positive returns for the S&P 500 for 2025 as a whole, as long as uncertainty stabilises before it completely derails what’s so far a very robust earnings backdrop,” he says.

His focus is on stocks trading at reasonable valuations where he sees visible earnings that convert to free cash flow.

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In the first two months of 2025, he reallocated capital from semiconductors, such as TSMC and Broadcom Inc (NASDAQ:AVGO), in the fund’s “income growth” bucket to IT service names, such as Accenture Class A (NYSE:ACN) and Microsoft Corp (NASDAQ:MSFT), given a strong run for the former.

In March, he used share price weakness to add back to TSMC. He also increased exposure to “relatively more resilient” personal care stocks, such as Procter & Gamble Co (NYSE:PG), at the expense of food and beverage names, such as PepsiCo Inc (NASDAQ:PEP), and added to European insurance (AXA SA (EURONEXT:CS)) at the expense of luxury goods exposure (Compagnie Financiere Richemont SA Class A (SIX:CFR)).

Amid April’s sell-off, he is taking his time, conducting further analysis on “several cash-generative names” that have derated.

Jamie Mills O’Brien
abrdn Global Innovation Equity
S&P 500 year-end prediction: Lower

The technology and innovation equities team at Aberdeen have been calling the end of US exceptionalism for some time, and positioning portfolios to capitalise on the growth of green tech in Asia and the shift in tech focus from the US to China.

Jamie Mills O’Brien, co-manager of the abrdn-Global Innovation Equity fund, says: “As we highlighted in the second half of last year, we view the risk reward for the Mag Seven and US equities as much less compelling than before.

“This is both a result of more limited earnings outperformance from the large-cap technology names, but also because – if looking at bottom-up consensus – the market still expects an acceleration in growth throughout 2025 for the S&P, which seems increasingly unlikely as economic conditions deteriorate.

“We expect to see further earnings growth downgrades for the S&P throughout this year and continue to see risks that the index ends the year lower.”

The fund remains underweight the US market, although the managers are prepared to “selectively take advantage of valuation dislocations among high-quality businesses”. One stock recently added is Uber Technologies Inc (NYSE:UBER).

The over-riding emphasis, however, is to position the portfolio to benefit from a broadening out in performance across sectors, geographies and themes.

“We see opportunities in emerging markets, in particular China, as well as high-quality, mispriced areas of the small and mid-cap space, both within the US and other parts of the world,” adds Mills O’Brien.