Market Event Update - 9 April 2025 - Tariff Turmoil

Global equity markets have displayed sharp volatility over the last week as markets try to digest the tariff mayhem that Trump has delivered.

In the last 24 hours, markets have rebounded across several regions, as investors stepped in to seize opportunities and capitalise on recent market dislocations.

In Australia, the ASX 200 rallied 2.3%, led by broad-based gains. Asian markets followed suit, with Japan’s Nikkei 225 surging over 6% and China’s Shanghai Composite up 1.4%, supported by state-directed buying activity. The Hang Seng Index also rose 1% amid improved sentiment. European markets opened higher, with the FTSE 100 up 2.7%, while the DAX and CAC 40 posted solid gains. In the US, equities staged a strong intra-day rally, but gains were short-lived as major indices reversed course late in the session. The Dow closed 320 points lower, and both the S&P 500 and Nasdaq ended in the red, weighed by persistent concerns around US-China trade tensions.

The main cause remains the same — rising trade tensions, their potential to fuel inflation, and growing concerns about how this could impact the global economy.

Despite recent volatility, it’s worth noting that over the past year, most markets have still delivered positive returns — and while a few remain slightly negative, it’s a reminder that markets do recover over time. The following table shows the performance of major markets from their 18 February highs and over the past 12 months (as of 7 April 2025):

How much more volatility can we expect?

Markets have fallen quickly, but this isn’t unusual when investor nerves are tested. More so now in comparison to previous years, as the flow of information and misinformation is quicker to reach our fingertips.

History shows that while periods like this are uncomfortable, they do pass — and often set the stage for better opportunities to invest.

Importantly, this market decline started after a long run of strong performance, when share prices were relatively high. Now, we’re moving closer to a level where markets typically offer much better long-term value. Additionally, history has shown us that over the past 50-odd years, global shares have outperformed cash investments in 85% of the two years following similar conditions.

Timing the exact bottom of the market is notoriously difficult — but history consistently shows that heightened volatility is not the time to panic. While hindsight may reveal the perfect moment to re-enter the market, it’s also too late to exit without locking in losses. In times like these, the most prudent strategy is to stay on course, remain disciplined, and focus on long-term fundamentals.

There’s also a real possibility that recent trade policies could be softened or reversed through political pressure, international negotiations, or even a shift in tone from President Trump.

Though Trump may be reluctant to appear as though he’s taking a backwards step, pressure from within his own party is mounting. High-profile figures like Elon Musk have voiced strong opposition, with Musk even sparring with Trump’s top trade adviser, Peter Navarro, calling him a “moron” for praising tariffs. Additionally, major Republican donors and business leaders — including Citadel’s Ken Griffin, JPMorgan’s Jamie Dimon, and hedge fund manager Bill Ackman — have expressed concerns, arguing that the tariffs are damaging to the economy and could trigger inflation or a recession.

Even figures traditionally supportive of Trump, such as Daniel Loeb and Ken Langone, have raised alarms, suggesting better negotiating strategies should be pursued. With growing opposition from influential voices, Trump faces increasing pressure to reconsider his stance on tariffs, as many believe the current approach could inflict significant damage on both the U.S. economy and its global alliances.

A very real upside scenario

It’s easy to forget that just two months ago, the biggest worry for markets was the economy growing too quickly. Before trade tensions took centre stage, global growth was strong, and company earnings were picking up speed. If there’s any easing or reversal in the tariff situation, markets could quickly refocus on those positive fundamentals. There are several realistic ways this could happen:

1. Political or legal pushback: US courts or Congress might challenge the legality of the new tariffs.
2. Negotiation: Many countries appear open to discussion, suggesting Trump’s hard stance may be a tactic to encourage better trade terms rather than a final position.
3. Policy shift: President Trump may revise or roll back tariffs once the broader consequences become clearer.

Any of these developments could lead to a fast turnaround in markets ― a helpful reminder that things can improve as quickly as they deteriorated.

What are we doing in response?

While the risk of a global recession has risen, it’s still not a sure thing. Even if a recession does unfold, history shows that most of the damage to share markets tends to occur early — and we’re already close to those levels. Trying to sell now in hopes of buying back in slightly lower carries a real risk: missing a potential rebound if trade tensions ease. Timing the market is extremely difficult, and history tells us that staying invested is always the wiser long-term strategy. A good example was during the COVID period, when markets sold off heavily and then rebounded just as fast.

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.

Navigating market volatility: Cutting through the noise

In investing, noise refers to anything that distracts us from making sound, long-term decisions. Markets are flooded daily with headlines, commentary, and data — much of it focused on predicting short-term movements. The mainstream media often amplifies this noise by highlighting the negatives because, as the old saying goes, “bad news sells.”

Learning to tune out the noise is especially important during periods of heightened market volatility. It allows us to stay grounded, avoid emotional reactions, and focus instead on making thoughtful decisions based on long-term fundamentals. Most of what dominates the headlines today is unlikely to be as relevant five or ten years from now.

History offers valuable perspective. The chart below shows how major markets have performed since 1990 — through recessions, political upheavals, natural disasters, and global crises. Despite these events, markets have continued to rise over the long term, climbing what’s often called the “wall of worry.” This reminds us that while short-term noise can be unsettling, staying focused on long-term goals has consistently been rewarded.

Source: Morningstar/Evidentia. Annualised and compounded returns of major asset classes 1990-2024. Returns are calculated using the following indices — Australian Shares (S&P/ASX 200 TR Index), International Shares (MSCI World Ex Australia NTR Index AUD), Australian Fixed Interest (Bloomberg AusBond Composite 0+Y TR Index AUD), International Fixed Interest (Bloomberg Global Aggregate TR Index AUD), Cash (RBA Cash Rate).

If you have questions