020 7812 1460
Search
Markets have been increasingly turbulent in recent weeks. Since taking office, the re-elected US President Donald Trump has not wasted time implementing many of the policies he campaigned on last year.
The latest example is the imposition of new tariffs, 25% on imports from Mexico and Canada and an additional 10% on Chinese goods. These measures are expected to keep inflation elevated and could have a knock-on effect on economic growth. However, just hours after the announcement, Howard Lutnick, the US Secretary of Commerce, suggested that the Canada and Mexico tariffs could be rolled back, highlighting just how uncertain and unpredictable the situation remains.
Market reactions so far
The response from financial markets has been swift. US equities, measured by the S&P 500, have fallen back to levels seen before Trump’s election in November.
As we’ve noted in previous updates, the concentration of equities in the US has grown significantly in recent years, particularly among the largest technology companies, often referred to as the “Magnificent 7.” These stocks have now seen a significant correction from their December highs.
In the UK, markets had been holding up reasonably well, but a slump in oil prices has led to a sell-off in major energy stocks like BP and Shell. Meanwhile, in Europe, sovereign bonds have repriced sharply, with German bonds experiencing their largest sell-off since the months following the fall of the Berlin Wall. This reflects growing expectations of increased government spending and borrowing, particularly in Germany, where the government has loosened its ‘debt brake’ rule, subject to parliamentary approval, to fund defence and infrastructure projects.
A changing world order?
Beyond market movements, there are broader geopolitical shifts at play. Trump’s focus on domestic priorities over international alliances is raising questions about America’s role as the world’s policeman. Recent developments, such as pausing arms shipments to Ukraine and unexpectedly aligning with Russia and North Korea on UN resolutions, suggest that the US’s foreign policy stance is evolving. His latest speech to Congress, where he stated his desire to ‘get Greenland’, only adds to the uncertainty.
Staying invested through the noise
At times like this, it’s essential to look beyond the headlines and focus on a diversified, long-term investment approach. Market volatility is an inherent part of investing, and history has shown that remaining invested through turbulence is key to long-term success.
So far this year, European and Chinese equities have performed strongly, supporting higher-risk portfolios, while cash and short-dated bonds have helped stabilise lower-risk portfolios. This highlights the importance of maintaining a well-balanced portfolio that can weather different market conditions.
As always, we monitor events closely and will keep you informed of significant developments. If you have any questions or concerns, please don’t hesitate to get in touch.
