Market Event Update - 3 April 2025 - Liberation Day Tariffs

What has happened in markets?

Markets have once again responded sharply to escalating trade tensions, as President Trump overnight announced sweeping new tariffs on key US trading partners — branding it a “Liberation Day” initiative aimed at reshaping global trade. The reaction has been swift. In Australia, the S&P/ASX 200 fell over 1.9% initially following the introduction of a new 10% tariff on Australian exports to the US but ended the day with a loss of less than 1%.

Prime Minister Albanese described the move as “unwarranted” and announced targeted support for impacted industries. Across Asia, markets also retreated, with Japan’s Nikkei 225 falling nearly 3% and South Korea’s Kospi down close to 1%, following US tariffs of up to 25% on goods from both countries. European and US share markets are expected to follow suit, with futures pointing to declines when trading opens later this evening.

What is causing the recent market volatility?

President Trump’s latest tariff announcements have added further fuel to the market volatility that began in late February 2025.

Financial markets remain unsettled, with shifting US trade policies creating ongoing uncertainty. Trump has previously warned that the US economy may face some “short-term pain” — a remark that has weighed on investor sentiment.

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 (at the time of writing, some economists predict the RBA will cut rates four more times in 2025 – whilst we believe this to be a little excessive).

As outlined in earlier updates, 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?

While market conditions have become more turbulent, we are closely monitoring developments to ensure we’re best positioned to support our clients. While there is no immediate need for major changes, we are carefully evaluating whether minor adjustments may be appropriate for our clients’ portfolios in light of recent events.

Why market volatility is not a reason to panic, but may present an opportunity!

Markets don’t 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 recover and reward patient investors over time.

Whether you’re building retirement savings or drawing income in retirement, your investment portfolio is designed to align with your financial needs. This means balancing short-term stability with long-term growth, ensuring that temporary market fluctuations don’t derail your financial goals. If you’re still working and contributing to superannuation, you’re buying units at a lower price, which can enhance your long-term investment growth as the market recovers.

While market volatility is often viewed with caution, it can present valuable opportunities for investors. Price fluctuations create chances to buy assets at a discount, which can result in greater returns when the market rebounds. For long-term investors, these temporary downturns are advantageous, offering the opportunity to acquire assets at a lower cost and increasing future growth potential. By staying disciplined and sticking to a long-term investment strategy, market volatility can become a powerful tool for maximising wealth accumulation over time.

Growth assets reward patience

Investing in shares and other growth assets has historically delivered higher returns over time, while more defensive investments like cash and bonds help cushion short-term volatility. Consider these key points:

Markets recover — While short-term declines are expected, long-term trends have remained upward.
Growth outperforms — Historically, shares have outpaced inflation and outperformed defensive assets.
Timing the market is risky — Missing even a few key rebound days can significantly reduce long-term returns.

Staying the course

As stated above, 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. No matter your stage of life, the best approach remains:

✔ Stay invested

✔ Stay diversified

✔ Stay focused on your goals

Got questions?

We’re here to support you through all market conditions. If you have any questions or would like to discuss how these market developments might impact you, don’t hesitate to reach out to our Modoras Wealth Management Team.