By Craig McAvinue – 1 April, 2025
“Be fearful when others are greedy and greedy when others are fearful”
An extremely volatile month saw developed markets end the month down. With the exception of the FTSE, this was also the case for quarter one in 2025….
Data from Google Finance
Conversely to normal market patterns with the USD gaining in a falling market, the greenback took a hit against other major currencies….
Data from Google Finance
The key driver of this market performance is the talk around tariffs on imports to the US. By the time you read this, later today the US president will announce details of these tariffs which have been the major talking point. The uncertainty around what will be announced on the so-called “Liberation Day” is always going to reflect negatively on markets.
The one thing that markets dislike more than anything is uncertainty. Trump’s presidential style creates uncertainty and ultimately volatility.
Mid month we saw the S&P 500 fall into what is known as a correction. This is when markets close 10% lower than their all time high. The S&P 500 value on 13th March fell into this territory from its 19th February high.
Whether the long term effects of this current policy will be beneficial, of course no one can be sure. Some commentators suggest this will not work longer term as it was tried in the 1930s without success. However I am skeptical about this as globalisation today is very different to what it was nearly 100 years ago
The 2nd April announcement should however remove some uncertainty and on the back of that I would expect positive moves (until the next wave of uncertainty is unleashed from the White House!)
As is always the case with periods of volatility, the key to success is to block out the noise. Controlling the things you can and not trying to control the things you cannot. This means looking through the emotion driving share prices and into what really matters, the companies and businesses you are investing in.
Consumer staple giants like Unilever and Proctor and Gamble have fared better during these recent falls, illustrating investors’ confidence in this less volatile sector. Regardless of tariffs and other economic factors. Consumers still need buy Dove Shampoo and Pampers
Typically, the U.S. dollar (USD) strengthens when markets fall because it’s seen as a safe-haven asset. Investors flock to it during times of uncertainty, like equity sell-offs or economic turmoil, boosting demand and driving its value up.
Right now though, , the USD has been falling alongside declining markets, which breaks from this norm. Once again the tariffs and uncertainty over a global trade war are outweighing its usual safe-haven appeal.
Crypto is also falling with Bitcoin now down over 22% since its December 2024 high. The more traditional hedge of gold seeing the best returns, up 19% year to date.
Equity investors need to be positioned as such for the long term. Reacting to short term movements is never a good strategy and leads to underperformance.
The current situation is affecting most stock markets and fits in with the old saying, that “When Wall Street sneezes the rest of the world catches a cold”
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