Market relief, but for how long?

Equities’ post-Easter rally partly reflects moderating rhetoric from the US administration. But with tariff policy up in the air and hopes of a U-turn looking optimistic, investors should keep their discipline to help achieve long-term goals.

23 April 2025

Global stocks rallied on Tuesday and Wednesday while the US dollar picked up as the US administration sought to calm tensions over the trade war and pressure on Federal Reserve (Fed) independence.

The first sign of serious concessions came from US Treasury Secretary Scott Bessent who on Monday stated that that the trade war with China couldn’t go on forever, before President Trump himself said on Tuesday that he didn’t plan to fire Fed Chair Jerome Powell after all, despite previously railing against him for not lowering interest rates and stating that his “termination cannot come fast enough”.

Despite short-term uncertainties, talk of a ‘new paradigm’ could be premature

The question now becomes whether this is the start of a serious U-turn that could see the restoration of ‘business as usual’ or merely another instance of a temporary row-back before the resumption of the administration’s tariff-driven economic agenda. Analysts, fund managers and strategists have spent the last few weeks attempting to place a framework around the tariff policy, with some declaring that a ‘Sell America’ strategy is now appropriate for investors. However, the last couple of days of market recovery suggest it may be premature to declare so-called Liberation Day the beginning of a new macroeconomic and market paradigm in which the case for US assets declines irrevocably and they need to be dumped wholesale in favour of Europe and other markets.

The President takes stock - US consumers are heavily invested in equities

The softening of the administration’s narrative could provide the first hints that some sort of discipline is being brought to bear on its policies and their erratic delivery. While President Trump has repeatedly stated that he is not looking at the stock market, the high allocation of the average US household to stocks (nearly 30%) goes some way to explaining the alarming decline in US consumer confidence which the administration cannot afford to ignore. Furthermore, corporate America’s swift response in terms of earnings downgrades and planned layoffs will also have been noted. One analysis by Bank of America revealed that the ratio of positive to negative comments on macroeconomic conditions during this Q1 earnings season has dropped significantly below the average and is on course for the lowest since 2009. Clearly it is too early to declare that ‘it was all a bad dream’ but there are tentative signs that the second Trump presidency is not entirely immune to outside forces and it is monitoring the impact on the real economy of its Liberation Day policies with mounting concern.

The importance of portfolio discipline

Where this ends up is anyone’s guess (things probably need to get even worse to secure a lasting reversal of policy) but the broader message investors can take away from all this is not to be driven by panic or talk of ‘paradigm shifts’ into changes to their portfolios which may affect how and when they attain their long-term financial goals.

Tentative market recovery - beginning of the end or end of the beginning?

From 23 Apr 2024 to 23 Apr 2025