Counterpoint April 2025: Navigating tariffs and volatility
The US recently introduced broad tariffs, triggering retaliation from China and the European Union. This escalation brings risks to growth and inflation. Uncertainty around tariff implementation, often driven by sudden announcements and reversals, has been more damaging to sentiment than the tariffs themselves.
Our latest thoughts on tariffs and volatility
Over the past week, financial markets experienced significant volatility primarily due to abrupt shifts in US trade policy. Although President Trump announced a 90-day pause on the reciprocal tariffs, the 10% overall tariff is still in place and the ‘trade war’ with China has escalated.
‘Liberation Day’ in America: our thoughts on market volatility and trade tariffs
The US finally announced broad tariffs on key trading partners on 2 April, bringing effective US tariff rates to levels not seen in a century. These measures include a baseline universal rate of 10% as well as targeted reciprocal tariffs, which range from 10% to 50%.
The European fiscal spending theme gains momentum
Last week, both German chambers, the Bundestag and Bundesrat, approved a constitutional amendment with over two-thirds of the votes. This decision allows for a 10-year defence budget and a 12-year infrastructure funding plan.
Our approach to navigating volatile markets
At the start of 2025, many investors believed that US President Trump’s policies would extend US economic and market exceptionalism. Now, two and a half months later, US equity indices have dropped about 6%, with the dollar being down 4.5%, and Treasury yields have fallen a quarter-percent.
2025 Alternatives Investment Outlook
Looking back at 2024, it's evident that our investment landscape is constantly changing. What lessons have we learned, and how can we better position ourselves for the opportunities and challenges of 2025?
Changing leadership - Counterpoint March 2025
US tariffs, market fundamentals and geopolitics have caused a change in leadership in 2025: European equities are now outperforming their US counterparts due to improving corporate earnings relative to expectations, more attractive valuations and newly announced government spending, including for defence and infrastructure.
What happened to US exceptionalism?
The idea of US exceptionalism has to do with the outperformance of the US economy and the corporate sector because of stronger fundamentals, an AI-driven innovation boost and supportive policies, as investors have experienced over the past couple of years.
Markets remain focused on geopolitics
At face value, a peace deal should be a positive catalyst for markets, particularly in Europe. So why did markets close on a mixed note last week? Markets traded without a clear direction.
Tariffs and inflation: not a linear relationship
US inflation in January was higher than expected at around 3% for both headline and core inflation (which strips out volatile components). This was mainly due to rising energy prices, along with price increases in used cars, motor insurance, medical care commodities, and airline fares.
German election – a driver for Eurozone growth?
The “Bundestagswahl” could result in a more growth-focused government led by a new Chancellor – but as it’s unclear how the next Berlin coalition will look like, hopes for meaningful, expansive adjustments could be disappointed.
Trade tariffs and the AI race keep dominating the market narrative
Last week was dominated by investors digesting the implications of President Trump imposing a 25% tariff on imports from Mexico and Canada, and 10% on China, plus a 25% tariff on steel and aluminium.
How we think about Trump’s trade tariffs
Over the weekend, US President Donald Trump kicked off a ‘trade war’ with its top three trading partners by raising tariffs to 25% on all imports from Mexico and Canada, and 10% on imports from China.
Our 2025 outlook
New horizons
As we turn the page on 2024, one thing is clear: the world we invest in continues to evolve. The past year defied expectations, surprising us with economic resilience even as markets braced for turbulence. So, what did we learn, and how can we better prepare for what 2025 might bring?
