Key topics:
- Tariffs driving global market volatility and investor uncertainty
- Diversified portfolios help manage risk during economic turbulence
- Long-term planning avoids panic selling amid short-term market noise
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By Magnus Heystek
Good day
I hope you are well.
I would like to provide some context and our views on the current global volatility to afford some assurance that we are monitoring the current situation on your behalf, as your appointed advisors.
Most of the recent global volatility has been caused by the uncertainty of the impact of tariffs. Markets don’t like uncertainty.
The deregulatory and tax-cutting parts of the Trump agenda remain as popular as ever on Wall Street. It’s hard to find anyone who likes tariffs. Two comments with regards to tariffs –
This is from JPMorgan’s David Kelly:
The trouble with tariffs, to be succinct, is that they raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity and increase global tensions. Other than that, they’re fine.
Carl Weinberg, chief economist at High Frequency Economics, said:
If they are imposed as threatened, US industrial activity will fold at once and we will not have to wait until the next ISM survey to know about it. Critical sectors of the economy face existential threats from the Trump tariffs and likely retaliation. Autos, energy and aerospace are three that come to mind very quickly. Appliances, electronics goods, furniture and clothing come to mind next.
The US has now imposed new tariffs effective 9 April 2025, a tactic Trump is using to negotiate a better deal for the US, which may or may not be imposed based on the outcome of those negotiations. Commerce Secretary Howard Lutnick recently gave an interview suggesting that they will be retracted or, in some way, reduced on America’s neighbours. In such an environment of uncertainty, it becomes important to assess how best to allocate new money. I wouldn’t make any knee jerk reactions on your current existing portfolio, as any retraction of these tariffs will ignite a rally and benefit already invested capital.
With all this noise currently in global financial markets, it’s completely natural to feel uneasy. The volatility and lack of certainty across global asset classes makes it feel as though there’s nowhere to hide. But this is precisely why we create investment plans for multiple investment environments, so that we don’t have to react to the market, but position portfolios in anticipation of it.
When we build a portfolio, we do so with times like these in mind. That’s why we diversified across multiple investments and carved out Cash Buckets – allocations to cash or income funds – to cover years of income needs. This allows us to avoid selling in panic and gives your allocation to growth assets time to recover, which history shows they always do.
In times of great uncertainty, we recommend you avoid drastic moves. This is not out of hesitation, but out of experience and discipline. Markets can’t be predicted, but with the right strategies and support, they can be navigated. That’s exactly why we’re here: to walk this journey with you, every step of the way.
Looking at past “extreme events” such as the Global Financial Crisis [GFC] and the Covid Crash, one lesson stands out: panic is not a strategy and selling during times of peak uncertainty can prove to be a costly decision.
In the context of the current tariff volatility, this lesson is particularly relevant. Short-term disruptions may shake investment markets, but long-term fundamentals often remain intact. Selling into fear risks locking in losses, while those who maintain discipline (and even increase risk exposure strategically) are often the ones who benefit most when stability returns. Most importantly, if proper financial planning is done in advance, your portfolio should already be positioned to weather events such as these. That way, you’re not forced to make reactive decisions under pressure; your plan does the work for you.
Right now, global markets are gripped by near maximum “Extreme Fear” judged by CNN’s Fear & Greed Index. During such periods, we often see all major asset classes moving in the same direction, with correlations between them rising toward +1. This temporarily undermines the usual benefits of diversification, leading to unusual and often disappointing portfolio behaviour.
But in moments like these, when there seems to be nowhere safe to turn, we remind ourselves of the one constant that has never let investors down: TIME. History consistently shows that the best long-term results come not from panic, but from patience.
Since 1936 the S&P 500 has seen 17 drawdowns of 15% or more. That is basically one hair raising event every five years or so, and yet the S&P 500 Index managed to deliver an average return of ~10% per year for the same period. This is a perfect example of Warren Buffet’s wisdom when he said, “the stock market is a device for transferring money from the impatient to the patient”.
In moments like this, opportunity is quietly building. Now is the time to hold steady, stay invested and, where appropriate, add, not reduce.
We maintain that you shouldn’t bet against the US, despite the recent volatility predominately caused by the current tariff uncertainty. However, our models suggest that, while the US was definitely due for a breather, fundamentals have held up despite the correction. Q1 US results which are due in the coming weeks will be important in reassuring US investors that a reasonable market premium remains justified. We believe the earnings season will provide support for US markets and our analysis suggests the long-term structural drivers remain in favour of offshore markets, particularly the US market.
Having said that, we are aware of the risks, including the US federal debt which continues to increase and remains a concern, together with trade wars, inflation, geopolitical risk, recession risk and the current volatility – all a perfect boiling pot for hedges such as gold, hedge funds and income funds (including global bonds) for de-risking purposes.
However, the recent volatility is a textbook case of a correction, rather than anything to be fundamentally concerned about. Any drop in value of 10% or less from the peak is considered a correction, and after a 60% upward trajectory from the S&P500 over the last two years, is a healthy re-pricing.
JP Morgan is of the view that we should see a strong double digit return from the S&P 500 after the recent volatility, supported by deregulation, tax cuts, negotiated geopolitical conflict (Russia and Ukraine) and negotiated trade wars. Donald Trump – like him or hate him – is a dealmaker and a bit of a classroom bully, whose tactics are to get everyone to the negotiation’s table, using tariffs to get what he wants. However, the retaliation from the countries on which he is imposing tariffs is not necessarily a good outcome for anyone and some resolution is expected.
We continue to monitor the current environment, but are not overly concerned at this time and identify this as an opportunity for investors with cash to enter the market.
It should also be pointed out that European and Asian markets have been running as a rotation from US stocks, and has escalated. We, too, have been positioned in this region via the Ranmore Global Equity Fund.
Diversification, therefore, remains key during bouts of volatility. And so too, remaining confident with your current portfolio and not implementing any changes at this point in time.