Tariffs and Market Impact
7 April 2025There’s been a lot happening in markets recently. Below is an update from our investment partner Funds SA about what they are doing during this time of market volatility.
You can also read our article on market volatility.
What has happened?
Last Thursday (Australian time) President Trump announced sweeping tariffs that will to be applied to a host of goods that are imported to United States from countries across the world. The lead up to this announcement has been widely reported in recent weeks and has been prominent in the Australian press since.
Global equity markets have sold off violently in response. US equities have been hit the hardest in the last week with the S&P 500 index down 9%, the NASDAQ 10% and the broad-based Russell 2000 also down 10%. Major European equity markets have fallen around 8% over the week while Australian equities have fared better on a relative basis, with the S&P/ASX300 index down 4%.
So-called “safe haven” assets have rallied in recent days. Australian government bond yields have fallen (prices have risen) by around 20 basis points to 4.2% and the gold prices has stayed firm at US$3,037oz as of Friday, 4 April. The Australian dollar has fallen 6% relative to the US dollar and is currently trading to $0.6000.
As we enter a new trading week, futures markets are pointing to a further fall of 4% in Australian equities. US S&P500 futures are trading down almost 4% and Australian government bond futures are higher (yields lower).
Funds SA Chief Investment Officer’s comment
In recent months, Funds SA has adjusted portfolios. For the Triple S Balanced investment option (the Triple S default investment option), global equities exposures have been lowered by around 2% and Australian shares by about 0.3%. The proceeds have been used to increase exposures to cash, property and alternative assets.
Though Australia appears to have got off more lightly than many other countries, the tariffs will be a large blow to our major export markets including China, India, and Japan. We expect that the global economy will suffer from the announcement and that the probability of recession and economic stagflation occurring will increase.
What is Funds SA doing about it?
Having taken some risk out of the portfolios recently, we don’t believe there is any need for any strategy change.
During periods of rapid and large market movements and uncertainty, many investors want to trade their investments based on emotions. That's not what we do.
Funds SA’s investment team will continue to monitor and review the portfolios over the coming days, weeks, and months as global markets shift and we will rebalance portfolios to maintain the current asset allocation.
Diversification is key and it works. Our allocation to defensive assets including fixed income (bonds) is working well in this volatile period. Fixed income, cash, alternatives and credit assets make up approximately 20% of the Triple S Balanced investment option while property, infrastructure and private equity assets account for around 22%. Total equities exposure in the option is approximately 57% and is most exposed to the current volatility.
To learn more about how your investments are managed, click here (How your investments are managed).