In recent days, global markets have experienced turbulence following President Trump’s announcement of sweeping tariffs on imports from many key U.S. trading partners. This surprise move has sparked fears of a tradewar and caused volatility across markets worldwide.
In this update, we explain what happened, how it’s affected investment markets, and how the portfolios have held up through the volatility.
What Happened
On April 2, President Trump announced tariffs (taxes) on goods coming into the U.S. from countries like Europe, China, Canada and Australia. The scope and severity surprised investors and have increased the risk of a trade war.
How Markets Reacted
Global financial markets plunged following this announcement, marking the most severe sell-off since 2020.
- U.S. markets tumbled nearly 5% on April 3, then plummeted another 6% on April 4
- European markets collapsed 12% in days following the Liberation Day announcement
- The ASX shed 4% on April 7, extending the worldwide market decline
- Investors rushed to safe-haven assets, driving up gold and government bond prices
- Oil prices plunged over 15% amid growing concerns about weakening global demand
- The U.S. dollar depreciated significantly as recession fears intensified
The Impact on the Portfolios
Despite the market volatility, our portfolios have proven resilient due to our disciplined, valuation-driven approach. Coming into 2025:
- We have avoided investing too much in U.S. tech companies, which we viewed as overvalued
- We have invested in more reasonably priced international and emerging markets
- Our global small-cap holdings have also done better than broader share markets.
While we may not have predicted this specific trade escalation, our portfolios are designed to withstand different market conditions and deliver consistent long-term returns.
What This Could Mean Going Forward
If Trump’s hardline stance persists, a global recession (potentially as early as 2026) is likely. A prolonged trade war could slow the global economy and push up prices – known as stagflation. That’s something we’re watching closely.
However, the recent market drop may already reflect some of these concerns. If trade tensions ease, our investments in emerging markets and smaller companies could do well. If things get worse, our diverse global investments should continue to provide stability.
Looking Ahead
Even though the trade war has created some uncertainty, our investment approach remains focused on:
- Finding reasonably priced investments that balance growth potential with long-term resilience
- Broad global diversification
- Managers with a track record of navigating uncertainty.
This approach continues to guide how we manage risk and seek long-term returns.
The coming months will no doubt bring more developments on the trade front, but we believe the portfolios are well-positioned for a range of possible outcomes.
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