One month on: Markets adjust to the new tariff era
During April markets experienced volatility after the US unveiled tariffs on the rest of the world. The news sparked a market correction, foreign capital outflows and refuge in safe-haven assets.In this environment, policy announcements rather than macroeconomic data – in other words, statistics that reflect the overall performance and behaviour of an economy – have become the marginal driver of different assets and markets.
However, as we have expressed previously, volatile and uncertain times call for patience and resilience among investors. It’s important to remember that market wobbles are nothing new. The stock market tends to experience a 20% drop once every four years and in most years will have at least one 10% drop. It’s easy to forget this because it’s not always the same event or action that triggers it. The truth is that the stock market has enormous potential to help grow wealth over the long-run but the price of that is putting up with short-term volatility.
What’s happened
Since the tariffs announcement on 2 April 2025, the global financial landscape has shifted dramatically. The blanket 10% tariff on US imports, combined with steep additional charges on specific countries sparked fears of a prolonged trade war and a global growth slowdown. This was subsequently reflected in sharp falls in business and consumer confidence surveys.
Markets reacted strongly. Bond yields fell and currencies like the Japanese Yen and Swiss Franc saw a sharp upward movement in price as investors rushed into so-called safe havens, anticipating lower global growth and potential policy easing from central banks to offset the economic damage. Commodities also suffered, particularly oil and industrial metals, as expectations for global manufacturing demand weakened.
However, by early May, stock markets had already recouped their losses. The 90-day pause on reciprocal tariffs for selected partners provided temporary relief. Equity markets were also able to claw back losses after US economic jobs and consumption data proved more resilient.
Where are we now?
While volatility remains elevated, market behaviour over the past two weeks suggests a transition from panic to opportunism. Many investors are dissecting which sectors and regions are most vulnerable to tariff impacts – and which may benefit. The relative softening policy stance by the US administration and willingness to negotiate has given investors some hope of calmer times ahead for markets.
Inflation expectations have risen modestly due to higher import costs, prompting speculation about how the Federal Reserve – the US Central bank responsible for monetary policy – will respond. So far, policymakers have struck a cautious tone, monitoring whether tariff-related price increases are transitory or persistent.
Opportunities going forward
While the new and emerging tariff regime has added a new layer of complexity for investors, it also reinforces a timeless lesson: markets adapt. For those with a long-term horizon, staying diversified, remaining patient, and focusing on fundamentals will be key to navigating the months ahead.
There are more unknowns than usual, given the policy uncertainty and President Trump’s use of tariffs as a negotiating tool.
But for investors willing to look beyond the noise, this period of uncertainty may be sowing the seeds of opportunity. For example, we see potential in the broad theme of industrial reinvention. Advances in AI and automation are reshaping industries and creating long-term growth potential for companies and investors alike. Exposure to global equity markets offers a way to participate in this evolution by potentially benefiting from any added value that this brings to companies and economies as it develops further and is adopted more widely.
It is important to diversify
At the same time, we remain mindful of valuations and stress the importance of diversification. While US shares dominate headlines, some of the less loved parts of the market – such as UK and European stocks – still offer relative attractiveness.
These regions have lagged in recent years, but for long-term investors, they may provide useful diversification at a reasonable price, particularly if the next decade looks different from the last given the uncertainty surrounding US return prospects.
In this context, a regionally diverse multi-asset approach makes sense to capture the broad range of global opportunities – from technological transformation to value recovery – while maintaining resilience across market environments.
For those waiting on the sidelines, re-engaging with markets through a diversified portfolio could offer a balanced path forward.
