In recent months financial markets have seen a material pick up in volatility as President Trump looks to implement his new policy agenda, while the rest of the world has responded with their own initiatives. This has all come at time when the market is increasingly nervous about what might happen to both growth and inflation and whether the US central bank will cut rates again 2025.
Markets never like uncertainty and have responded by tracking lower to give back many of the gains of recent years. On the other hand, bond markets have responded positively, as yields fall from the highs they reached earlier in the year.
Here in Australia the volatility picture is no different, despite the Reserve bank of Australia (RBA) cutting rates for the first time in many years. The RBA’s move was aimed at providing support to the economy, that continues to struggle under the weight of cost-of-living pressures. Adding to the volatility has been a company earnings season which was the most tumultuous in years. For companies failing to meet earnings expectations, share prices moved as much 20% in a day, which culminated with the ASX200 being down -3.8% in February alone.
Looking forward the big question is how long will the current volatility last? The simple answer is we don’t know, particularly with a US President continuing to act the way he has since the beginning of his term in office. It is becoming increasingly clear that Trump is not finished yet and his actions and policies are likely to bring changes that will continue to impact markets and potentially result in regime shifts many thought were not possible only six months ago. One thing is clear though, sentiment has changed materially since the end of 2024 and will likely undermine markets as along as the current caution prevails.
Navigating these market swings will be the biggest challenge for investors over the remainder of 2025. Trying to predict what Trump may or may not do is going to be fraught with danger in our view and we would therefore strongly encourage employing a disciplined, long-term approach, that looks through the day-to-day noise of current markets. Further, ensuring your portfolio is diversified across asset classes, regions and themes will also help investor portfolios weather the volatility storm while also helping position investors to capitalise on any opportunities that may come from assets which will inevitably get oversold.
Disclaimer: This economic and market update has been prepared by Evergreen Fund Managers Pty Ltd, trading as Evergreen Consultants, AFSL 486 275, ABN 75 602 703 202 and contains general advice only.
It is intended for Advisers use only and is not to be distributed to retail clients without the consent of Evergreen Consultants. Information contained within this update has been prepared as general advice only as it does not take into account any person’s investment objectives, financial situation or particular needs. The update is not intended to represent or be a substitute for specific financial, taxation or investment advice and should not be relied upon as such.
All assumptions and examples are based on current laws (as at April 2025) and the continuance of these laws and Evergreen Consultants’ interpretation of them. Evergreen Consultants does not undertake to notify its recipients of changes in the law or its interpretation. All examples are for illustration purposes only and may not apply to your circumstances.
