The first quarter of 2025 and early April proved to be a challenging period for global markets. Share markets experienced significant declines, driven largely by ongoing uncertainty around US trade policy and broader political instability.
Global Share Markets
In the US, the S&P 500 fell 5.8% and the NASDAQ dropped 8.1%. Australian shares were also impacted, with the S&P/ASX 200 falling 3.4%. Investors were cautious despite supportive moves like the RBA’s February rate cut.
Trade Tensions Impacting Confidence
President Trump’s evolving tariff policies on China and other nations caused considerable market volatility. While some tariffs have been postponed, uncertainty remains high, affecting business and consumer confidence globally.
Signs of Economic Softness Emerging
US consumer confidence fell sharply, and inflation expectations rose to levels not seen since the early 1990s. Higher inflation expectations could make the US Federal Reserve more cautious about cutting interest rates. Weaker consumer sentiment and employment intentions suggest slower economic growth ahead.
Currency and Bond Markets Reflect Caution
Bond yields rose and the US dollar weakened, signalling a shift away from US assets. Other currencies, such as the euro, yen, and pound, gained ground.
Outlook for Company Profits
Analysts have begun lowering earnings expectations for US companies in 2025, reflecting the tougher environment.
China's Response
China is taking a more defensive stance by allowing its currency to weaken and preparing future rate cuts to support its economy.
Australian Economy
Growth forecasts for Australia have been revised lower, with GDP now expected to expand by just 1.5% in 2025. Leading indicators suggest some further softening in activity, with wage growth and consumer spending likely to remain under pressure.
Looking Ahead - Risks and Opportunities
The combination of slower growth and rising inflation — sometimes referred to as stagflation — is a growing risk. We are closely monitoring developments to assess how they may affect investment markets and opportunities ahead.
While uncertainty remains elevated, it’s important to remember that market volatility can also create opportunities for disciplined investors. We continue to monitor conditions closely and remain focused on helping you achieve your long-term goals.
