What's happened?
Since President Trump declared "Liberation Day" and announced his tariff plan on Wednesday, 2 April 2025, global stock markets have experienced significant turbulence. The announcement of a 10% baseline tariff on imports from all countries, except Canada and Mexico, to be implemented on 5 April 2025, along with higher tariffs on major trading partners like the EU, Japan, and China, to take effect on 9 April 2025, led to immediate concerns among investors and businesses.
This global trade shock led to stock markets experiencing several days of sharp losses.
Equities fell following the announcement. In sterling terms, global equity indices fell nearly 10%, with the dominant US market falling by more than 10% - and over 16% on an intraday basis. Losses were broad based but with some regional dispersion.
Government bond markets initially gained as investors sought their perceived safety but subsequently struggled to hold the gains amid concerns about the inflationary impact of a trade war.
Currencies moved sharply in response to the changing backdrop. A rotation away from US assets contributed to weakness in the US Dollar. Gains were led by the Japanese yen, typically a defensive currency, and the euro.
To mitigate the immediate fallout, on Wednesday 9 April President Trump announced a 90-day pause on the implementation of the higher tariffs. However, the 10% baseline tariff for all countries applied on the 5 April and the increased tariffs on Chinese imports remain in effect. Specifically, the tariff rate on goods imported from China which has been raised to 145%. The pause was well received but given ongoing uncertainty and developments, the US equity market is still down almost 7% in sterling terms since ‘Liberation Day’ and UK equities are down a little over 3%.
While this 90-day pause is intended to provide time for negotiations and to help calm the markets, we believe in the short term, there remains a high level of uncertainty.
How we’re responding
Given the wide range of potential short-term outcomes, Aegon’s Portfolio Management team continues to take a long-term, valuation-based approach to the funds they manage.
We believe we are in a time of profound global policy change, fraught with uncertainty. This presents both risks and opportunities, and we continue to take a balanced, diversified approach. This includes underweighting expensive equity markets, notably the US, which we believe may be more exposed to change, and maintaining an overweight position in government bond risk that we think can provide resilience during any economic downturn.
Anthony McDonald is manager of Aegon's Risk-Managed Portfolios and Multi-Asset funds, and the Aegon Workplace Default fund.
Additional support
Market volatility can be a nerve-wracking experience, not just for investors but also for financial advisers managing their concerns.
Watch our Steadying the ship webinar where Anthony McDonald, our Head of Portfolio Management, and Tom Mathar from the Centre for Behavioural Research, offer practical techniques to help you to shift clients' focus away from short-term market fluctuations and toward their long-term goals.
Capital at risk.