The evolving global trade landscape, marked by the US Trade Wars, is creating ripple effects in Australian markets. Tariffs, supply chain disruptions, and shifting trade agreements pose risks to Australian shares, particularly those with international exposure. In this environment, a diversified, risk-aware approach is crucial.
At Clear Sky Financial, our dedicated Investment Committee is actively monitoring economic data, market movements, and potential opportunities, and making adjustments to ensure portfolios remain well-positioned for short-term volatility, as well as long-term growth.
There will always be periods where portfolios drop in value, and while it’s never nice to see your portfolio balance going down, it’s a normal part of the investing cycle. These periods of volatility, when managed correctly, present excellent opportunities for future wealth creation.
Clear Sky Financial’s Investment Committee shares some of the key factors driving current market volatility.
US Trade Policy and Rising Tensions:
One of the most significant drivers of this market shift is the unpredictability surrounding US trade policies. The administration’s aggressive tariff announcements have ignited concerns about potential slowdowns in global economic growth. While trade wars present risks, and we are keeping a close watch on the situation, a global recession is not a guaranteed scenario.
Weak Economic Data:
Recent data out of the US has raised worries about the health of the economy. Consumer sentiment and spending have been weaker than expected, and some leading indicators suggest a slowdown in GDP growth. However, we would need to see more significant evidence of economic distress to consider a recession as likely. For now, we remain cautiously optimistic that the economy can manage through these challenges.
Impact of Government Efficiency Measures:
The initiatives led by Elon Musk’s Department of Government Efficiency (DOGE) to cut government spending, are expected to lead to job cuts in the public sector. This, combined with growing uncertainty around the US labour market, presents an additional headwind for the economy.
The End of the Trump Put:
In recent years, the market has benefited from investor optimism about the pro-growth policies under President Trump. However, the sense of security that came from the “Trump Put” – the belief that Trump would act to support the market – has waned. His recent statements about trade policies and the potential for short-term economic disruption have left markets feeling vulnerable. This has contributed to heightened volatility, and investors are adjusting their expectations accordingly.
How We’re Responding:
At Clear Sky Financial, we are acutely aware of historical market behaviour during times of heightened uncertainty. While this spike in volatility is unsettling, we believe there are still positive factors that can drive market recovery over the medium- to long-term. Corporate balance sheets remain strong, earnings growth is reasonable, and global monetary policy remains supportive. Additionally, non-US economies are showing signs of recovery, which may provide a positive counterbalance to US uncertainty.
We continue to monitor these developments closely, ensuring portfolios are well-positioned to weather uncertainty – while still striving for sustained growth.
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Information contained in this document is considered to be true and correct at time of publication. In addition, the information provided is general information only, and does not take into account any individuals’ objectives, financial situation and needs. Before acting on any information contained herein, you should consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.
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