Market Update: Staying the Course Amid Market Adjustments
The year 2025 started on a mostly positive note for markets. The United States (US) was poised for growth, and while the US market appeared expensive, many predicted another strong year for US equities. Globally, inflation seemed under control or at least on a downward trajectory. While the usual mix of geopolitical tensions, domestic politics, and trade uncertainties remained, they had not been a major concern for markets. Investors had embraced the idea of “US exceptionalism,” which suggests that the US economy stands out as particularly strong. The outperformance of US bond and equity markets in 2024 was expected to carry into 2025.
Recent Market Movements – What’s Changed?
In recent weeks, we have seen a shift in market sentiment. The key driver? A change in expectations around the impact of President Trump’s policies. Initially, markets responded positively to the prospect of a Trump administration, anticipating pro-growth measures such as tax cuts and deregulation. However, that optimism has moderated, with concerns around the potential economic fallout now gaining attention.
The term “Trumpcession” has emerged, reflecting concerns over weaker economic data indicating a slowdown. The US economy is now expected to post negative GDP growth for the first quarter of 2025, although it is important to note that a technical recession is only defined as two consecutive quarters of negative growth. Adding to market unease, President Trump’s rhetoric has shifted to a “no pain, no gain” approach, with a willingness to endure short-term economic weakness.
Further complicating the global picture are geopolitical developments, particularly President Trump’s stance on NATO, which has added uncertainty to global trade and political alliances. The broader impact on interest rates, trade, capital flows, and economic policy remains uncertain.
Current Market Snapshot
Despite these headlines, markets remain resilient, with several bright spots:
US Market Rebound: After a period of volatility, the S&P 500 has logged its best session since November 2024, up 2.13%. Investors are adjusting expectations, and fears of a government shutdown have eased.
Strong European and Asian Markets: European indices, including Germany’s DAX and the UK’s FTSE 100, have posted strong gains. In Asia, China’s Shanghai Composite and Japan’s Nikkei 225 have also moved higher.
Australian Market Strength: The ASX 200 opened higher today, with all sectors in positive territory. Resource stocks have gained, driven by rising commodity prices.
Commodity Boost from China: News of China’s plans to boost consumption has lifted iron ore prices, benefiting Australian mining stocks.
Additionally, the OECD is releasing its latest economic outlook, and central banks remain cautious in their monetary policy decisions, balancing inflation control with economic growth.
A Balanced Perspective
While market sentiment has shifted in recent weeks, it is important to remember that market cycles are normal. Some analysts view this as a much-needed correction following strong performance in 2024. Strategies such as "buying the dip" are being considered by market participants, particularly given the resilience of global economies outside the US. The US still retains options such as tax and interest rate adjustments that could support economic stability and avoid a deeper downturn.
We’ve Got Your Back
Market fluctuations and periods of uncertainty are a normal part of investing. While short-term volatility may feel unsettling, history has shown that well-diversified portfolios, aligned with individual risk tolerance and long-term objectives, remain the best strategy for navigating market cycles. Reacting impulsively to short-term events seldom leads to better investment outcomes, and in many cases, market dips provide opportunities rather than reasons for concern.
Just know that we are across all developments in financial markets and continue to monitor the situation closely. There’s no need for alarm—this is part of the natural market cycle, and as always, we have your back.
