Charlie Jamieson, Chief Investment Officer

April 2025 served as a stark reminder to global markets: uncertainty is no longer a temporary disruption — it’s a defining feature of the economic landscape. A series of sharp market seizures, policy shocks, and a volatile recovery underscored just how fragile investor confidence has become. The month’s events didn’t just rattle portfolios; they fundamentally reshaped the conversation around risk, trade, and the global economic outlook.

The initial tremors came from a wave of market dislocations, triggered by the imposition of tariffs and a sudden shift in trade policy. These disruptions sent investors scrambling, with volatility surging across equities, fixed income, and currency markets. While some asset classes showed signs of recovery by month’s end, the broader tone remained cautious. The bounce-back, though welcome, felt more like a pause than a pivot.

At the core of this instability lies a growing unease around global trade. The introduction of tariffs and a temporary 90-day reprieve created a climate of hesitation. Businesses, unsure of what lies ahead, have become increasingly cautious — delaying investment, scaling back hiring, and bracing for further disruption.

If this environment persists, the economic consequences could be significant. A prolonged period of hesitation risks tipping the economy into recession. Markets are already demanding a higher risk premium, particularly in the U.S., where the slowdown has been most pronounced. The uncertainty is not just about trade — it’s about the broader direction of policy and its impact on growth.

Complicating matters further is the strategic approach taken by the U.S. government. A deliberate effort to slow the economy, pressure the U.S. Federal Reserve into cutting rates, and restore competitiveness through fiscal restraint and lower energy prices have introduced a new layer of unpredictability. While the intention may be to stimulate long-term growth, the short-term effects — negative growth, falling oil prices, and inflationary pressure — are muddying the waters.

Bond markets are now pricing in aggressive rate cuts from central banks around the world. In Australia, the Reserve Bank is expected to begin easing in May, with markets anticipating multiple cuts throughout the year. While this may offer relief to mortgage holders, it also risks inflating property prices, making home ownership even more elusive for first-time buyers.

Meanwhile, the global perception of U.S. economic leadership has taken a hit. The need to refinance sovereign and corporate debt adds to the complexity, raising questions about long-term stability and investor confidence. These developments are not isolated — they ripple through global markets, shaping sentiment and strategy far beyond American borders.

In this environment, asset allocation becomes a critical tool for navigating uncertainty. Recent shifts in U.S. economic policy have increased global instability, with efforts to stimulate growth through debt refinancing and fiscal tightening weighing on investor sentiment. The resulting volatility has reinforced the importance of strategic asset allocation. While government bonds —particularly in Australia — have offered stability, corporate credit markets remain fragile and vulnerable to late-cycle stress. Historically, corporate credit markets during late-cycle stress exhibit increased volatility, higher default rates, and tighter credit conditions. This cycle has the hallmarks of that, along with a build-up of leverage from a decade of low interest rates exacerbating the fragility of these markets, which mutates into significant disruptions when economic conditions worsen.

The U.S. exceptionalism argument has also created an imbalance in U.S. assets where they account for nearly 70% of global equity market capitalisation, which heightens their vulnerabilities along with the corporate credit market if President Donald Trump forges ahead with aggressive tariffs.

Looking ahead, economic data is expected to weaken before it improves. Hard data is likely to fall in line with already soft indicators, reinforcing the case for caution. For investors, this means preparing for continued volatility and reassessing portfolio resilience.

The key takeaway from April is clear: uncertainty is not going away. Trade tensions, policy shifts, and market volatility are now part of the fabric of the global economy. Navigating this environment requires more than just tactical adjustments — it demands a mindset shift. Embracing uncertainty, rather than resisting it, may be the most important strategy of all.

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