Shifting Priorities
The optimism that followed Trump’s re-election has faded – at least for now.
His administration is prioritising tariffs and spending cuts (austerity) over tax reductions and deregulation (growth), adding uncertainty to financial markets and weighing on investor sentiment.
A Familiar Pattern
U.S. and Australian equities have pulled back about 4% from their mid-February highs, wiping out year-to-date gains. While any decline can feel unsettling, this level of volatility isn’t unusual. Market fluctuations in any year are common, particularly at the start of a U.S. presidential term – just look back to 2018, when trade policy concerns triggered multiple 5% drops over six months. Those same concerns are resurfacing now.
Market Rotation
Last year’s strongest performers, the U.S. and Australia, are lagging, while regions that previously struggled – like Europe and China – are gaining momentum. Europe, in particular, is off to its best start since 2000, driven by hopes for peace in Ukraine, increased defence spending, a recovering Chinese economy, lower interest rates, and attractive valuations.
Uncertainty, But Also Opportunity
As we highlighted in our recent quarterly report, Trump’s policy direction is unpredictable but also flexible. While uncertainty is high, that doesn’t mean long-term risks for investors – it just requires patience as more clarity emerges.
What we’re seeing reinforces our view that 2025 will be a more volatile and constrained year for markets. That’s why a balanced, active investment approach is critical, rather than simply sticking with last year’s winners. Our recent allocation to global listed property is part of that strategy, positioning us to benefit from the market’s shift toward defensive sectors.
We’re monitoring global developments closely and will contact clients when appropriate to adjust portfolios to take advantage of potential opportunities. As in 2018, patience, discipline, and diversification will be key to navigating the road ahead.
General Advice Warning: Any comments in this communication do not consider your objectives, financial situation or needs. Before acting on any general advice, consider whether it is appropriate for you.