Important Update on US Tariffs

In the world of investing, every challenge brings new opportunities. The recent US tariffs announcement, while causing some market volatility, also opens up exciting possibilities for investors with a medium- to long-term view.

What We Know About the US Tariffs

The US has announced “reciprocal tariffs” on various countries, including a 10% tariff on Australia. Goods made in the US are exempt, and there are temporary exemptions for items like steel, aluminium, and pharmaceuticals.

What We Don’t Know

The duration of these tariffs is uncertain, and we don’t know how other countries will respond. They might retaliate with their own tariffs or negotiate lower tariffs on US exports.

Initial Market Reactions

US stocks saw a sharp sell-off late last week, especially companies reliant on imports like Apple and Nike, as a result Australian have opened sharply lower. This news might shift the focus from inflation to economic weakness, potentially leading to interest rate cuts both locally and abroad.

Potential Ramifications

US consumers will face higher prices, leading to inflation. Global GDP growth could slow down, but there are factors that might offset these challenges, like potential fiscal stimulus measures and the reshoring of manufacturing.

What Are We Doing?

Our portfolios are well diversified across asset classes and investment styles. We avoid relying too much on market timing and prefer to stay the course during volatile times. This environment also presents buying opportunities for those looking to enter the market or capitalise on cheaper assets.

Concerns about the US or global economy is not something unseen before and COVID and GFC certainly had worse outlooks. Despite the concerns during COVID and GFC, markets have more than recovered and the buy and hold investor has been rewarded profitably.

In terms of our portfolios, they were built with market volatility in mind. We are well diversified across all asset classes, we remain underweight US (which is still relatively expensive) And have a bias towards lower volatility and “Value” securities. (Value style investing is a strategy where investors focus on assets trading for less than their intrinsic values, such as those with low price-to-earnings ratios or high dividend yields).

Our portfolios including underlying investment managers are reviewed on a quarterly basis, with regular rebalancing occurring where suitable to capitalize on undervalued assets and to keep asset allocations within the designated risk profile.

What Should You Do?

We encourage a long-term view, understanding policy shifts like tariff announcements can lead to market volatility, and while short -term fluctuations are inevitable, a diversified portfolio can help smooth out the bumps and provide stability during periods of uncertainty.

Conclusion

The US tariff announcement has added to market volatility, and whilst short term disruptions are inevitable, it’s important to remember that this situation will continue evolve, and we will continue to keep you informed of any future changes.

If you have any questions about your portfolio or want to discuss additional investment opportunities, please feel free to reach out. We’re happy to support you in any way we can.

Important Information: This advice is for information purposes only and does not constitute investment, legal, tax, or other advice. Past performance is not a guide to future returns. The value of investments may go down as well as up, and an investor may not get back the amount invested.