Excess Returns What Investors Get Wrong About Trade Wars | Kai Wu
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May 14, 2025 Kai Wu, the Founder of Sparkline Capital, dives deep into investing tactics amidst trade wars. He argues that while many investors flock to domestic stocks, high-quality multinational companies with intangible assets are better positioned for stability. Wu discusses the historical context of tariffs and their irrational market reactions, revealing the benefits of global exposure. He provides four actionable strategies for building resilient portfolios, emphasizing the long-term advantages of international companies over domestic firms in today's shifting political landscape.
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Global Firms Outperform Domestic
- Global companies have historically been higher quality and more profitable than domestic firms.
- Abandoning global firms now risks missing long-term benefits of globalization.
Tariff History and Challenges
- Tariffs seen historically have never been this high in over 120 years, making current trade uncertainty rational.
- However, the goals of tariffs often conflict internally, making unified policy predictions difficult.
Top S&P Companies Are Multinational
- The largest S&P 500 companies are mostly multinationals with around 50% of revenues from outside the U.S.
- Apple outsources production extensively, demonstrating complex global operations.