Trump, Tariffs, And Turbulence

Times like these can create anxiety for investors with many wondering about the subsequent implications for their portfolio. In this brief update, we’ll unpack how we are thinking about the current market environment and what investors can do to block out the short-term noise and retain focus on the bigger picture.

Last week on Wednesday April 2^nd, Donald Trump announced a series of sweeping tariffs, imposing a baseline 10% duty on imports from most countries, with significantly higher rates for nations with which the US has large trade deficits.

The tariff announcement was such a major development because tariffs:

• Raise costs for businesses and consumers
• Disrupt global trade
• Increase the risk of retaliation leading to trade wars, and
• Create widespread economic uncertainty

Following the tariff announcement, the US share market (S&P 500)  moved by -5% on Thursday and another -6% on Friday in its biggest 2-day loss since the Covid-induced sell-off in March 2020. Fast forward to now and from the peak in mid-February, the S&P 500 found itself within a whisper of bear market territory (a 20% decline from peak) having dropped 19% over 6 weeks.

Markets continued to gyrate on short-term sentiment until Wednesday, April 9^th, where Trump announced a 90-day pause on all tariffs – the only exception being China, whose increased tariffs will remain in place due to the retaliatory tariffs they put back on the US. The market reaction to this news was substantial. By the market close on that day, the S&P 500 had rebounded by 9.5%, its largest daily return since October 2008.

As we always consider, the question stands: where to from here? Our answer: nobody knows! This situation is so fluid and fast-moving. It genuinely hangs on what side of the bed Trump wakes up on tomorrow and has the potential to completely re-shape the world economic order. We believe that the pause in tariffs events are a probable indicator that Trump’s tariff regime is more of a bargaining chip than a genuine economic threat.

Sentiment driven fluctuations are incredibly difficult to predict in the short term. Rather than speculate or be reactive to the flavour of the day, we believe the most sensible way to invest is to control what we can control. For us, that is to:

• Invest in a portfolio of high-quality assets with diversification among asset classes, geographies and sectors
• Retain sufficient cash and defensive assets to ride out short-term volatility and take advantage of opportunities as they arise
• Stay invested for the long-term, and seek to benefit from some wise tactical decisions along the journey

For now, the short-term direction of markets will likely continue to be driven by shifts in sentiment and the future direction of government policy. But as the saying goes, time heals all wounds, and we believe those who remain invested in high quality assets and make some smart tactical decisions along the way will be rewarded in time.

Article by Will Starkey

Will Starkey is an Investment Advisor at 360Private, specialising in equity analysis and portfolio construction.