Tariffs and Market Volatility

Over the past few days, the Trump administration's tariff plans have negatively impacted global markets. During these times of stress, stepping back and reviewing first principles is essential.

What has happened in markets?

Markets over the last week have fallen sharply due to global trade tensions, which came to a head in the recently announced sweeping new tariffs on key US trading partners — branded a “Liberation Day” by the Trump Administration.  The reaction has been swift as global equity markets have fallen and recent retaliatory tariff moves by the Chinese Government have added further fuel to the fire.

What is causing the recent market volatility?

President Trump’s tariff announcements have unsettled global markets, with shifting US trade policies creating ongoing uncertainty for countries and companies alike. The broader sell-off reflects rising concerns that renewed trade tensions could lift inflation, disrupt global supply chains, and place pressure on economic growth.

Continued uncertainty may prompt central banks — including the Reserve Bank of Australia — to consider further interest rate cuts as a precaution. While the US tariff saga has been a key trigger for recent volatility, it follows a period of strong performance. The S&P 500 rose by more than 20% in each of 2023 and 2024, pushing valuations to elevated levels. From this starting point, markets have become more sensitive to shifts in the outlook, making them particularly reactive to any emerging uncertainty around future growth expectations.

What are we doing in response?

We continue to monitor developments closely and, while there is no need to adjust your portfolio at this stage, we are thoughtfully considering whether some minor changes may be appropriate, to portfolios we manage in light of recent events.

Market volatility is not a reason to panic, but rather part of the natural ebb and flow of anormal market cycle, albeit the recent step down as been instigated by policy responses from the Trump administration.

Markets rarely move in straight lines. Ups and downs are part of the normal investment cycle, influenced by factors such as interest rates, inflation, economic shifts, and global events. While short-term drops can be unsettling, history shows that markets tend to recover — and reward patient investors over time. Most recently, the US market fell over 25% in 2022 and was able to recover the losses by the following year.

Looking ahead – staying the course

For those still accumulating wealth, downturns can be an opportunity to buy more at lower prices. For those in retirement, portfolios are designed with income-producing and defensive assets to support your near-term needs.

A few points to remember:

• It is very difficult to time markets, and times like these is when sticking to your long-term strategy is prudent. Time 'in the market' beats 'timing the market.

• Shares do inevitably bottom and rebound.

• Current losses do provide opportunities for investors to buy shares more cheaply.

• The current volatility is the price we pay for owning shares which provide a higher return over the long-term.

• Selling shares after a fall, locks in a loss.

If you have any questions or would like to discuss anything about your portfolio in more detail, please don’t hesitate to reach out.