Tariffs, Tipping Points and Butterfly Effects: Trade Turbulence Hits Global Markets
In episode #7 of the The Active Investor with SGH – Tariffs, Tipping Points and Butterfly Effects: Trade Turbulence Hits Global Markets, Steve Hiscock and Rob Hogg unpack investor uncertainty and the global ripple effects of the newly announced US tariffs:
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Trade Turbulence Hits Global Markets
Transcript
Steve Hiscock: Hello to everyone listening to our podcast, the Active Investor with SGH. I’m Steve Hiscock, the chair of the company, and it’s my pleasure to be your host for today’s episode. In today’s podcast, we’ll be looking at what happened overnight with the tariff announcements, then we’ll look back at what’s happened over March, 2025 and what these both mean for the outlook going forward.
This podcast is being recorded on Thursday, 3 April 2025. Joining me again today is our Chief Investment Officer, Rob Hogg.
Tariff Tensions and Market Uncertainty: What Investors Need to Know
Hi Rob. Welcome back again.
Rob Hogg: Thanks very much, Steve. Great to be back on this very, very quiet day. The market is down about 1% in early afternoon.
Steve Hiscock: It has been an incredible month, a really interesting month. To a large extent, the markets are focused pretty much on what’s going to happen with the tariffs and these announcements were made overnight. Given the importance the markets have placed on this, why don’t we start looking at the announcements regarding the tariffs?
Could you start by giving us a brief summary of your thoughts, a helicopter view? Is it as bad as feared? Is it not as bad as feared? It’s interesting, as you mentioned, the market fall would sort of imply that it’s worse than expected. What are your thoughts on that?
Initial Reactions Across Equity Markets
Rob Hogg: Yes, you are absolutely right. When you do get a market falling in price, that is usually because stuff is worse than expected. Announcements were made earlier this morning Australian time, around the close of the equity market in the United States.
And the initial reaction was very, very negative indeed. Looking at US markets in afternoon trade, they were down by 3.5 to 4% or thereabouts, right? They’ve now pared back about a percentage point of that, maybe fractionally more.
Similarly, when our market opened this morning, I think it was down almost 2% at one stage. Now, as we’re recording this, in the very early afternoon, the Aussie equity market is down about 1% only. So, the initial market reaction was far more negative.
But as we’ve gone through the trading day, some of that negative, not all of it, has dissipated. And in fact, one of the biggest impacts we’ve actually seen is in terms of interest rates here in Australia, where there’s been a not insignificant move in interest rates all the way across the yield curve today, down around 0.15%, which is a reasonably sizable move on a daily basis.
The Aussie dollar is a fraction weaker, but it’s only about 0.5%, or thereabouts. And as I was saying earlier about equities, the initial reaction was more negative than it is now. It’s still negative, but it’s just nowhere near as negative as it was when the announcement was first made.
Steve Hiscock: Well, it’ll be interesting to see and I’m going to ask you about the Reserve Bank and potential interest rate cuts. But it’s interesting that the market is down 15 basis points across the curve. That does imply that maybe the RBA will cut, but we’ll get onto that later.
I’m going to read you a statement that Trump made. Can you please give me your reaction to it? Trump said, “These tariffs will remain in effect until such a time as is determined that the threat posed by the trade deficit, an underlying, non-reciprocal treatment, is satisfied, resolved, or mitigated.” In the way you read that somewhat complicated sentence, are you reading that it might mean some of these tariffs might be wound back?
Rob Hogg: Yeah, absolutely. I think all of these things are up for negotiation through time, depending on what other countries around the world do.
Look, I thought just very briefly to speak directly from the statement that Trump made.
So, first of all, it’s interesting to note that he’s used powers vested in him as president, including the International Emergency Economic Powers Act and the National Emergencies Act.
So that’s interesting about the way he’s couched the announcements today. It then goes on to talk about the rationale.
So he says: “I, Donald J. Trump, president of the United States of America, find that underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and US trading partners, economic policies that suppress domestic wages and consumption as indicated by large and persistent annual US goods trade deficits. These constitute an unusual and extraordinary threat to the national security and economy of the United States.”
Apologies about that very long sentence, but that is literally what he said. It’s interesting to get that sense of where he is coming from. So it’s all about what the White House presumably regards as unfair trade practices.
And I think, to be fair to them, there would be quite a number of cases around the world where there are unfair trading practices, but that is the corner from which Trump and the White House are speaking today.
Steve Hiscock: So that’s their starting point and the word reciprocity that was used a lot in his televised address and is all over the internet in terms of how he describes the other country’s tariffs.
But if we took Australia, for example, is it not actually strictly correct that it’s reciprocity against an Australian base tariff? Because we don’t charge 10% tariffs on US goods. So what does he mean really by reciprocity in that case?
Rob Hogg: I think yes, every country’s unique, obviously. I think what he means by reciprocity is whether or not the US runs a trade balance – trade surplus or trade deficit. Now, in fact, with Australia, the US runs a trade surplus. You’d think that, as far as plenty of other countries are concerned, we’d be toward the better end from the US point of view just because of that.
But I think reciprocity more broadly means the nature of the way goods and services are treated as they come in and out of countries and exactly what the barriers might be. So we’re not just talking necessarily here about tariff barriers, charges, customs duties, GST, and so forth.
We’re also talking about things like biosecurity laws, and I know that’s been highlighted with Australia that quite naturally, as an island, we have very stringent biosecurity laws, and some countries might regard that as being deliberately designed to be a restraint on trade. So that’s one example.
But I think, broadly speaking, reciprocity suggests that he’s looking for trade balances with the rest of the world and certainly not trade deficits with the rest of the world. We know that that’s quite difficult indeed, impossible to achieve in large part when you run a huge current account deficit as they do in the United States and where we’ve got these very, very significant global supply chains.
So, it just runs counter to the common and modern way in which global trading nations work together.
Steve Hiscock: And there are some exemptions globally, aren’t there, Rob? For example, steel, aluminium and automobiles are already subject to tariffs, so they will not be subject to additional tariffs as far as I understand.
And it’s the same with things like copper and pharmaceuticals, for example. So they’re not likely to be hit with additional tariffs. And obviously there’s some areas where they’ve got shortages. For example, energy that’s not necessarily widely available in the US, and they’re not necessarily going to get hit either. So there are some exemptions.
So, in Australia’s case, it looks like the actual amount of our exports is really under 10%, so it’s not actually going to be that significant as a first-order effect. First of all, do you think that’s right? Am I simplifying it by saying first-order effect and then saying there’ll be other-order effects?
Rob Hogg: I think you are sensibly simplifying it like that. Because who’s to really guess what the second round effects could or possibly won’t be.
But look, in Australia’s case, he has spoken about putting on a 10% tariff, applying to Aussie and New Zealand goods but really Aussie goods exports to the US are not a huge amount of GDP, indeed, around 1% I’ve seen reported in some reports earlier today. So we we’re not talking about something that will be hugely economy moving.
It could, obviously, have impacts on individual industries, but on the overall Australian economy, the imposition of this 10% tariff on Australian exports is not really going to have a huge effect. Much more important, of course, will be via the impact on our major trading partners, so China in particular, that’s where if we’re going to see any effect, and we very likely will.
That’s where we are most likely to see it come through. Not on the impact on Australian exports, I don’t think.
Global Trade Impacts: China and Beyond
Steve Hiscock: Well, if we talk about major trading partners, let’s look at China. Correct me if I’m wrong, but the way I read the release, there’s already a 20% tariff, and they get another 34% tariff. So the tariff is 54%.
Rob Hogg: It looks like that on the face of it.
Steve Hiscock: Yes. That’s really quite punitive.
Rob Hogg: It is. And you would think that that would have big implications for Australia. Now, a lot depends obviously on what the Chinese do in reaction to that. A lot depends upon whether and how much of this is all just the usual Trump bargaining sort of pattern where he often comes out with very big numbers, very wide numbers and then uses that as a negotiating point. Although, I think the fact that almost everybody seems to have gotten onto that, must in the fullness of time, make that sort of bargaining approach less and less effective. But on the face of it, yes, that’s what seems to be the case. China does look very significantly impacted from what we’ve seen this morning, but this is obviously only the very, very opening of what will very likely be a very long and protracted process. And, of course, we haven’t even spoken about what the Chinese might do domestically to try and boost their economy as well. We’ll come back to that a little bit later.
Steve Hiscock: Absolutely. And the other thing is retaliation, right?
So Australia has come out this morning and said that they’re not going to take any action on the basis of this tariff. Certainly, other countries are going to be almost forced to, aren’t they?
If you had to guess, and it is a guess, what do you think China’s now looking at a really punitive tariff regime for its exports to the US? What are their options?
Rob Hogg: Well, it’s a little bit difficult to suddenly move all of the manufacturing activity to the US, which is ultimately what Trump is about, trying to reshore or onshore various manufacturing industries. And that, of course, wouldn’t make any sense for a lot of the stuff that the Chinese make.
I can only guess that it’ll be bargain, bargain, bargain from here. And, of course, there are huge geostrategic issues rolled up in all of this as well, which I don’t think can be divorced from the trade policy that we’re looking at today.
Steve Hiscock: No, and I don’t know if you remember reading the Butterfly Effect, from was it 20 or 30 or 40 years ago?
The fact that a butterfly’s wings flap somewhere in Mexico and it ends up being a hailstorm somewhere else. And, you do wonder about the unintended consequences here because everyone understands what he’s trying to achieve. The problem is that there are going to be casualties that they haven’t really thought of yet, and that, I guess, is what worries investors too, right?
Rob Hogg: Exactly. Although bizarrely enough, well, not bizarrely enough but just the very fact that we’ve had the announcement this morning, in a sense, is fractionally less uncertainty. Although it’s only just really kicked off another plane of uncertainty. But the fact that we’ve got through the night overnight, and yes, markets were pretty weak earlier on, but have recovered somewhat, right? I don’t think Liberation Day, in the grand range of how it could have turned out, could have been considerably worse. But the uncertainty has been fractionally lessened, and that is something that markets just very, very quickly priced in and come to cope with.
Steve Hiscock: It’s fractionally less worse than expected. Certainly, Canada and Mexico must be feeling that because they already faced 25% tariffs, which Trump has tied to drug traffic and illegal migration. These are remaining in place, but they’re not going to be subject to new additional tariffs. Is that right? Does that lessen the risk of retaliation?
Rob Hogg: Well, certainly from Canada and Mexico, but you’ve mentioned China with this extra 54%, Taiwan an extra 32%, India 26%, Korea 25%, Japan 24%. So that’s really where most of the upside surprise, the negative surprise, has come, I think, from the overnight announcement.
Steve Hiscock: Okay. So there are marginal winners, as in they didn’t get punished more, but there are some real losers out there.
Rob Hogg: On the face of it – yes.
Steve Hiscock: So, some of these are really strong allies. That’s an incredible thing to do, isn’t it, really, from that perspective? If you look at Japan, they’ve been an ally for a long period of time, yet they were slapped with a massive tariff.
Rob Hogg: But this is sort of the whole Trump new world where everything’s being redrawn and becoming more transactional.
Steve Hiscock: And of course, Rob, all this has to be essentially ratified, doesn’t it, by the legislature.
Rob Hogg: Yes, it has to be ultimately, and even though the Republicans took the White House and both houses of Congress, of course, the numbers there were relatively thin. The majorities there were relatively thin. Really, nothing is absolutely certain and, at the very least, some of this mooted legislation could be bogged down in the various workings of Congress. And perhaps even changed to a small extent or a large extent, or perhaps even turned on its head. So there’s all of that uncertainty about the whole process as well.
Steve Hiscock: Just so that listeners are aware, we’re speaking about five hours after the announcement, there’s going to be so much happening after this, including all these things that ultimately have to get passed.
One thing that worries me a little bit is the inflationary consequences of what Trump is doing. He spoke a lot this morning about company A spending 500 billion, company B also spending 500 billion, company C also spending 500 billion, remarkably symmetrical numbers. Then he ran off a whole list of companies that are spending billions.
Let’s say these numbers are wildly inflated or somewhat inflated. They’re still going to spend some money. And in a capacity-constrained economy, it’s got to be inflationary, isn’t it? I mean, what happens?
Rob Hogg: Well, you would certainly imagine, all things being equal, it would lead to at least less downward pressure on interest rates.
For the Fed, that kind of investment response, you would imagine it would be viewed as being growth positive and as a consequence would leave the Fed in the position where there it was likely less need to cut rates? That’s not altogether a bad thing, obviously. But they need that and they need inflation pressures to ease too, to really move further ahead with rate cuts.
Steve Hiscock: Well, it’ll be interesting to see what happens there. I mean this, all this spending that Mr. Trump has announced on behalf of these corporates, which was very kind of him. But at the moment, obviously there’s a heightened risk that the US is moving into a recession and it’s not a done deal, but certainly the probability has increased.
What does this announcement do to that scenario?
Rob Hogg: Well, look, in some ways, it takes away some of the uncertainty about what he was going to say. But I think he only layers on top of that, just incredible uncertainty about how other countries will react, what US corporates should do… and it’s just the volatility of the narrative and then the announcements, and then the potential peel backs and the deals.
All of this is really starting to impact sentiment in the United States. And we can see that for corporates, we can see that for households. It is raising inflation fears and concerns. And we can see that as well in the bond market over the shorter term out to two years, there’s definitely a higher inflation rate discounted over that time period.
So it is starting to have an impact on sentiment and expectations. And of course, the concern is that if these trends continue, the uncertainty, the inflation fears, they will become self-fulfilling.
And that you do get companies that put off investment decisions or employment decisions and households that similarly put off decisions because of the uncertainty and the concerns.
On the inflation side, the risk is that these much higher inflation expectations over the short term become part of people’s daily thinking. And that is when the inflation can really take off, when the view becomes that inflation will be higher. Well, that often leads to inflation being higher.
So those expectations are very important, to try and control those inflation expectations.
Steve Hiscock: You talk about uncertainty. With all this uncertainty, there is no way that these corporates are going to spend all this money on a policy that may be reversed in four years. It’s just not an economically rational thing to do. So there’s no way all this CapEx is going to happen.
Rob Hogg: No, and one of the things we’ve been looking at is what the trends in CapEx intentions are so far and that they haven’t fallen away. So far they remain somewhat solid, if I can put it that way. It’s a little bit like the story with employment, too.
So far we haven’t seen significant increase in layoffs either by the government sector or by the private sector. But as we were just saying, that can change if the uncertainty lasts long enough and remains at a high enough level, there is a correlation between the two, if the relationship lasts for long enough time-wise.
Steve Hiscock: So, Rob, you used to be an economist many, many moons ago, but these surveys, clearly they haven’t asked the people that are going to spend $500 billion apparently, otherwise the CapEx intentions would be in through the roof, wouldn’t they? Are these surveys, how are they actually chosen?
They haven’t spoken to Microsoft and they haven’t spoken to all these NVIDIA’s and so forth, if these CapEx surveys are correct.
Rob Hogg: Well, they likely have spoken to a number of tech companies because you can see it in the survey responses on an industry-by-industry basis.
In the ISM survey, the manufacturing survey, which was released a couple of nights ago, you can go through the commentary on an industry-by-industry basis and uncertainty, trade, inflation concerns, inventory building ahead of potential tariff concerns – all of these factors are common across the feedback.
You can see the building there of inventory levels and which is really bound up with the concerns and the uncertainty about what the outlook looks like.
Steve Hiscock: Well, that’s right. Uncertainty is the word of the day. I was going to ask you if we’re going to see a trade war, but the problem is that we just don’t know at this stage. It’s way too early. And I get that, you’d have to be very cautious there. It’s very early days, obviously we’ve only been a few hours into this new era. We’ll obviously know a lot more when we catch up next month.
March Market Performance: Shifts in Global Equity Sentiment
Tariffs have obviously been the focus, but they’re by no means the only thing that’s going on. Moving on to other things, can we talk very briefly about what’s happened over the month of March? Equities continued to weaken, didn’t they?
Rob Hogg: Yes, they did. And without going back on this uncertainty yet again, that was a significant part of it, the interesting part, was that the most weakness was observed in the United States. So all of the key US market indices were down by way more than was the case in most other countries, certainly continental Europe, although continental European markets ended the month a little bit weaker in general as well.
We’ve spoken a few times about this whole US exceptionalism thing – the sentiment was incredibly positive towards the United States at the end of the last calendar year, and that was just built on the Trump reelection and all of the talk about tax cuts, deregulation and so on.
That euphoria really peaked at the end of last year, positive euphoria for the United States. We’ve also spoken before about how, in a sense, the flip side of all of that was growth fears, tariff fears for continental Europe and Asia, and China in particular. And as we’ve been suggesting, when you get such polarised and almost extreme views, it really doesn’t take a lot to turn things back the other way.
So I think part of what we’re seeing is just a reaction to the overhyped views about the US, and it’s similarly a reaction, but in the opposite direction, to what were overly pessimistic views on continental Europe and China. In the US, the negativity has been turbocharged by this uncertainty and the effect it’s having on sentiment, corporate sentiment, and household sentiment. But it is also very interesting and important to point out that, in Germany, they announced and then passed March the biggest fiscal spending package that they’ve had since the reunification of East and West Germany. Well, bonds sold off quite a deal over the month and ended up by a little bit more than 30 basis points higher, and that dragged up the continental European bond yields as well.
But in a sense, that’s a positive because what we really see is the discounting by the market of stronger expected growth, particularly what we describe as a fiscal impulse. So that’s the impact on the economy of budget spending. And that’s projected by some analysts to move from being a drag on growth to being a boost to growth. Not so much necessarily this year, but moving into 2026.
That’s all of the best reasons to have an increase in bond yields that we saw in Germany and across continental Europe.
And then the story in China, it is similar in some ways, but not because of a huge fiscal turnaround, but because of the very, very negative sentiment.
And yet we’ve seen for the last couple of months some slightly better indeed, slightly positive, outcomes there in some of their industry surveys. So again, it all goes back to where we started. It all goes back to where the market was positioned. It all goes back to the extreme differences in sentiment and how they’re now, if you like, coming somewhat closer together.
And part of that is what we see in the equity market performances, not only in the month, but also calendar year to date.
Steve Hiscock: That’s right. The European markets have been much stronger, haven’t they? They’re probably the best-performing markets this year.
Rob Hogg: Particularly in the German market, the DAX, one of the very best-performing indices in the world. Those markets are still up 5 to 10% year to date, whereas US markets are still down around 5% or thereabouts.
Steve Hiscock: Right. With your economist hat on, Germany has now decided to spend X billion dollars on defence, and that feeds its way through to the rest of Europe. Can you run through how that would work?
Rob Hogg: Well, that’s what we see reflected with the bonds: that it would filter down those defence-related orders, but it’s also infrastructure spending. They’re two parts of the same package of vaguely similar proportions. Yes, there’s a broader impact on European manufacturers of capital goods and defence-related goods and so on. It is a very, very powerful impetus and in a way this would very likely not have happened without President Trump.
So you talk about unintended consequences. And butterflies in Mexico.
Steve Hiscock: Well, this could be a, a moth. It’s been decades that the European economy has been trailing US GDP, right? It’s been, I’m going to guess a roughly 1% per annum, but it’s probably more than that, right?
Rob Hogg: Probably more.
Steve Hiscock: Is this the thing that changes that?
Rob Hogg: Look, it will in the short term, but these differentials, growth differentials come back to a lot of factors including culture, but also population, productivity, longer-term economic growth. Compared with continental Europe, the US really runs rings around continental Europe on all of those right variables, productivity growth, innovation, investment, population, and participation rate might be the one area where they’re somewhat closer.
So just the nature of US culture will always be one that challenges the past and regenerates, where there’s every incentive to invest. Europe is a very, very different society. I mean, you have an unemployment rate of a much higher level in Europe, I suspect partly because that’s what society wants and is happy to maintain.
Whereas you get the sense Europeans would never be happy with the type of wage rates and conditions that the US imposes across the broader private sector, which means they have a much lower unemployment rate. I think thankfully Australia’s somewhere in the middle. I think we’ve got a much better balance of policy and social structure.
Steve Hiscock: You mentioned China before, just some of the indicators that you’re seeing? I mean, are they soft indicators, are they sentiment indicators or are they actual hard data coming through?
Rob Hogg: Good point. They do verge on the soft side. They have, however, been going up for a couple of months, interestingly, in the face clearly of volatility and uncertainty globally.
Steve Hiscock: So we could end up with a situation possibly where the economy physically starts to recover. It’s been in the doldrums for a little bit now, and obviously that’s had a huge impact on the equity market. Are you seeing the signs that this is going to turn?
Rob Hogg: It does seem to be that way inclined. And again, unintended consequences, or not so much unintended, but one of the byproducts of the announcement overnight could possibly be a bigger-than-expected fiscal spending package or monetary-related policy package in China to address what the US has announced overnight.
So it’s important, I suppose, to think about these, all of these events as occurring where there’s all kinds of reactions and policy announcements that others will make. And it’s almost impossible to make a judgment on any particular day on exactly how it will pan out.
Tariffs and the Australian Economy: What’s at Stake?
Steve Hiscock: Yeah, exactly. Let’s have a look at Australia.
The inflation seems to be drifting in the right direction, gently downward. It’s giving the RBA the reserve bank scope to cut rates, but it didn’t cut in April. I know it wasn’t widely expected, but, what did you think about the decision not to cut rates in April?
Rob Hogg: As you say, it really wasn’t expected. It was interesting, as it always is, to read the Reserve Bank’s accompanying statement and also very, very interesting to watch the press conference that the governor of the RBA does. That’s been a fantastic change by the RBA in the last little while under the new governor, Michelle Bullock.
And the tone was really quite different in that meeting, and the tone was quite different in the statement, in the sense that when they cut rates in Feb, the bank and then the governor spent a lot of time pushing back against market pricing, which was at the time for probably what it is now, about three rate cuts.
So the pushback was that the market was just getting a little bit away with itself and that the Reserve Bank at the time was nowhere near as convinced as the market that all of these rate cuts would be forthcoming. Now, it’s not that the governor or the statement came out and endorsed market pricing, but it was a lot more balanced about market pricing. On the face of it, it suggests that the RBA is a little more inclined to think about cutting rates now than they were thinking about cutting rates again after their Feb cut.
Steve Hiscock: And surely the employment figures that came out, that surprised on the downside, I think you mentioned in a recent article. Surely, the Reserve Bank will have to take that into account.
Rob Hogg: They will. And the CPI you mentioned before, is drifting ever so slowly in the right direction that the employment numbers were indeed a big surprise, down by almost 53,000 in Feb. But to be fair, they’ve surprised us on the upside for many, many months.
Steve Hiscock: Yes. Good point.
Rob Hogg: In all of these numbers, it’s probably best to look at the unemployment rate. It is less affected than the other numbers by just the month-to-month quirks. And features of the numbers, as you said, remained unchanged at 4.1%, which is not that far away from where it’s been for quite some time and not that far above its recent lows a year or so ago.
So on the face of it, that still points to a pretty supportive labour market.
Steve Hiscock: Okay, well, there’s lots of people out there that are hoping for three rate cuts this year. Let’s talk about the political side and the budget. So the budget was handed down in about a week ago, March the 25th.
Can you give us just a brief overview of anything that particularly struck you? Given the election has been announced for the 3rd of May, clearly there was a framing towards return of to power, which is not surprising, but was there anything that did surprise you?
Rob Hogg: Well look, I think probably that the tax cut announcement was the main surprise, but having said that, the days of budgets having a big impact on either the equity market or the currency or interest rates or interest rate expectations. They seem so far in the past that it’s hard to remember and this in a sense, this announcement was pretty similar to that. Broadly speaking, there was little in the way of reaction to these broader market indicators to the budget, as there was broadly very little reaction to the election itself. The announcement, the election more important as, as is very widely discussed is the nature of the next government, whether it’s a minority government or a majority government. The difference obviously is that with a majority government, there’s less policy certainty. So that will be the next key hurdle, if you like, for the equity market to get over.
Steve Hiscock: So what you’re saying from an equity market perspective, a clear majority by labour or liberal would probably be okay, but a minority government might lead to market uncertainty, I guess.
Rob Hogg: Yeah. Yes, exactly that. And we know that there’s nothing markets find more uncomfortable like all human beings, than uncertainty. And that’s what you’re more likely to get with a minority government.
What’s Next for Equity Markets Amid Heightened Volatility?
Steve Hiscock: So that leads me onto the final question really. Which is, what do you think about equity markets from here?
They’ve come back a bit, from admittedly all time highs. So everyone has been observing how expensive they are in the, in the US I guess it’s the super expensive end that’s come off more than the cheaper end. But I mean, where to from here in terms of broad equity markets? What, what’s your view?
Rob Hogg: Well, look, equity markets globally are still well weighted toward the more expensive side of their longer-term sort of ranges, if you like. Uncertainty is still and is even higher. So look, we spoke last month about being more cautious. We’ve moved from cautious optimism, which is a position we’ve held for the last several months to becoming more cautious.
We remain more cautious, although we do note, of course, the fact that markets have given up a deal more so the US markets from their peaks. Clearly some of this uncertainty and downside is being priced but it’s still an incredibly difficult environment to make any sort of forecast about how things will pan out.
Hence, we just redouble and redouble our efforts looking at any and every potentially useful piece of data and very reasonably clearly, pretty clearly on that basis, sentiment has clearly rolled over and fallen quite sharply. But, the actual indicators of spending still remain relatively solid. So the key here is how long the uncertainty is maintained and at what level, and how heightened that uncertainty is. Uncertainty at a high level can become self-fulfilling, and we honestly don’t know what Trump will say tonight, tomorrow, the next day. And I don’t think anybody else does. We remain cautious, although we would note that markets are fractionally cheaper than they were a month ago, and that some of this uncertainty is now being discounted in prices. But really for equities to move sustainably higher from here, you need continued downward inflation trends globally, more rate cuts globally, whilst underlying economic activity and earnings remain reasonably solid. It would be extremely helpful for all market participants to see all of this tariff talk, settle down somewhat, and then we can all get used to perhaps a new normal, which in all likelihood won’t be as positive as the old world, but if we can get some certainty, that will be at least a small positive.
Steve Hiscock: But then as you say, maybe it is a positive world for maybe China. They’re forced to spend money internally, maybe Europe, with this defence spending and infrastructure spending.
Maybe, maybe they end up being in better shape. And as you said before, it wouldn’t have happened necessarily if it wasn’t for the actions of the US.
So Rob, thank you again.
Rob Hogg: No pleasure, Steve, as always.
Steve Hiscock: Thank you. You’ve done a great job distilling confusing information into clear, concise statements.
As we discussed last month and you mentioned it before a cautious tone is definitely appropriate at this time. We’re definitely in for a bumpy road. It looks like it’s set to continue. Volatility is something that we’ve got to expect because at the moment, we’re announcement driven and so we are hanging on the next announcement.
As you mentioned before, you know what the US says tonight and next night and so forth, but hopefully we can get these concerns to settle down a bit and the market will appreciate that. So thank you, Rob.
And that brings us to the end of today’s podcast. We looked at what happened with regards to the anticipated tariff announcements, the much anticipated tariff announcements, and the, and then at what happened across the globe in March in the run up to this.
And then we looked at what it means for investors going forward. We hope you enjoyed today’s episode. Please subscribe so you don’t miss out on future podcasts and follow us on LinkedIn, YouTube, Spotify, Apple, or wherever you get your podcast from. Please do let us know if you have any questions or comments.
Until next time, stay informed and stay active.
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