Liberation Day

Markets edge lower amid policy uncertainty and trade tensions

Published: 03 April 2025
Updated: 03 April 2025
5 minute read


Table of contents

 

Quick Take

Global sharemarkets declined by around 4% in March, with Trump 2.0 policy uncertainty weighing on risk sentiment. Tech stocks were hit hardest, while India rose by 6%. Rising uncertainty led to a 10-11% spike in volatility and a lift in gold prices, as investors sought safe havens ahead of Trump’s self-declared “Liberation Day” on 2 April.

Trade tensions dominated headlines. Trump imposed 25% tariffs on all non-US-made cars and parts, initially suggesting leniency in future measures. However, by month-end, reports indicated a preference for broader tariffs. This materialised on 2 April, with a 10% baseline tariff on all imports effective 5 April and higher rates for key trading partners, including a 54% total tariff on Chinese goods.

In Europe, stronger-than-expected data from the Eurozone was largely driven by post-election policy shifts in Germany, including a €500 billion infrastructure fund and higher defence spending. Despite optimism, economists warn that implementation challenges may delay tangible economic benefits until 2026-27.

The RBA held the cash rate steady at 4.10%, noting easing inflation but highlighting risks from tariffs and global uncertainty. The labour market remains tight, and a rate cut is still expected in May, pending further clarity on inflation and employment trends.

We continue to monitor both domestic and global developments closely. While Trump’s latest tariff plan may sustain near-term volatility, a swift resolution could see markets rebound. Should economic conditions deteriorate, central banks have room to cut interest rates. In either scenario, we believe our portfolios are well positioned and remain ready to act if conditions warrant.

 



Snapshot

Global sharemarkets fell in March, with the spillover of Trump 2.0 policy uncertainty acting as the biggest headwind on risk sentiment. Major indices in the US, Europe, Japan and Australia declined by around 4% during the month. Technology companies were hit the hardest, with the Nasdaq down around 8%, while markets in China and Hong Kong finished flat and India rose by 6%. 

Consequently, given the heightened level of uncertainty, volatility increased by 10-11%, as did the gold price, with investors looking for safe haven assets ahead of what President Trump has called Liberation Day on 2 April. 

At the risk of stating the obvious, much of the focus was on trade during the month. Trump announced additional 25% tariffs on all cars not made in the US and deemed the levies, which will include auto parts, as “permanent”. While he noted that the widely anticipated 2 April reciprocal tariffs would be “very lenient”, subsequent reports at the end of the month highlighted his preference for more onerous measures, including the renewed potential for a universal tariff.

Those reports came to fruition on 2 April, when Trump unveiled a sweeping new tariff plan at a Rose Garden ceremony. Under this plan, a 10% baseline tariff on all imports takes effect on 5 April, while certain nations will face even higher tariffs, such as 24% on Japan and 20% on the European Union, starting 9 April. A 34% tariff on China will add to previous duties, making the base rate on Chinese imports 54%.

All of these developments contributed to the continued deterioration in soft sentiment data over the month, with the tariff issue also behind the pickup in inflation expectations reported in consumer surveys. Despite the pullback in equity markets, it was not all bad news. There were signs of resilience in some of the February hard data released during the month. Retail sales, industrial production, housing starts, and existing home sales all surprised to the upside, while underlying inflation came in cooler than expected and featured a deceleration in both rent and owners’ equivalent rent. Perhaps most importantly, weekly initial claims data continued to highlight a solid labour market.

The Citi Economic Surprise Index proves this point, measuring whether economic data is better, in line or worse than expected. Currently, economies such as the US and China are performing in line with expectations, while Australia deteriorated during March, and the Eurozone has been exceeding expectations since January.

The encouraging results for the Eurozone seen in the Citi Economic Surprise Index can largely be attributed to developments in Germany since its federal election in February. The outgoing German parliament approved a reform of the constitutional debt break, establishing a €500 billion infrastructure fund and facilitating increased defence spending. While financial markets have been upbeat about large-scale German spending, economists caution against expecting immediate benefits. Chronic labour shortages, bureaucratic procedures and complex tendering requirements are expected to delay positive effects until 2026-27.

Closer to home, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.10% as anticipated. Its statement noted that underlying inflation was easing in line with February forecasts, though the Board needs confidence this trend will continue, given lingering inflation risks. The Board also highlighted that escalating tariffs and geopolitical tensions could negatively impact global activity. Despite an employment drop in February, the RBA also maintained its view of a tight labour market. Economists still predict a May rate cut once the Board gains a clearer picture of inflation and employment trends, post-election fiscal settings, and US tariff composition.

 

Looking ahead, the increased volatility we anticipated this year has now materialised. Following the historic gamble of Trump’s new tariff plan announced on 2 April, market volatility may persist in the short term as intense trade negotiations unfold in the coming weeks. Rest assured, we will continue to monitor both domestic and global developments closely during this period.

The duration of these negotiations will ultimately shape how global financial markets respond. Should the tariffs remain in place for an extended period, economic conditions may begin to weaken, prompting central banks to consider interest rate cuts. Conversely, if a resolution is reached within weeks, markets could rebound swiftly. Either way, our Investment Committee believes our portfolios are well positioned and we remain ready to act if conditions warrant. 

Contact us today!

 

Key Stocks

CWY logo 1

 

Cleanaway Waste Management

Cutcher & Neale Positive Impact Model

Cleanaway Waste Management is Australia’s largest waste management company. They operate across three main sectors including health services, industrial waste and household waste e.g. in Newcastle the company services the yellow bins.

The company is focused on long term growth, aimed at bettering the circular economy towards diverting waste from landfill such as its food and garden organics recycling facility in Sydney.

Cleanaway Waste Management forms part of the Cutcher & Neale Positive Impact Model, aligning with the United Nations Sustainable Development Goals of Responsible Consumption & Production and Climate Action. 

VIE logo 2

 

Veolia Environnement

Cutcher & Neale Positive Impact and International Shares Model

Veolia Environnement is a global leader in environmental services, providing sustainable solutions in water, waste and energy. The company provides end-to-end water, waste and energy solutions, including water treatment and distribution, hazardous waste processing and the operation of efficient heating and cooling networks.

Veolia is the world’s largest water company, having presence in the French domestic market, US, Chile and Catalonia. The water segment of the company accounts for 40% of their turnover and provides a stable revenue as water distribution is non-cyclical and indexed to inflation.

The company forms part of both the Cutcher & Neale Positive Impact Model and the Cutcher & Neale International Shares Model, where it has been the top performer across both Models over the last month, increasing 11.80%.

CWY logo 1

 

Cleanaway Waste Management

Cutcher & Neale Positive Impact Model

Cleanaway Waste Management is Australia’s largest waste management company. They operate across three main sectors including health services, industrial waste and household waste e.g. in Newcastle the company services the yellow bins.

The company is focused on long term growth, aimed at bettering the circular economy towards diverting waste from landfill such as its food and garden organics recycling facility in Sydney.

Cleanaway Waste Management forms part of the Cutcher & Neale Positive Impact Model, aligning with the United Nations Sustainable Development Goals of Responsible Consumption & Production and Climate Action. 

VIE logo 2

 

Veolia Environnement

Cutcher & Neale Positive Impact and International Shares Model

Veolia Environnement is a global leader in environmental services, providing sustainable solutions in water, waste and energy. The company provides end-to-end water, waste and energy solutions, including water treatment and distribution, hazardous waste processing and the operation of efficient heating and cooling networks.

Veolia is the world’s largest water company, having presence in the French domestic market, US, Chile and Catalonia. The water segment of the company accounts for 40% of their turnover and provides a stable revenue as water distribution is non-cyclical and indexed to inflation.

The company forms part of both the Cutcher & Neale Positive Impact Model and the Cutcher & Neale International Shares Model, where it has been the top performer across both Models over the last month, increasing 11.80%.

 

About The Author

Wade is the head of the Investment Services division at Cutcher & Neale and has over 10 years of industry experience in accounting and investment advisory roles.

Ryan is our Portfolio Manager, bringing over 15 years of experience in managing multi-asset investment portfolios with a specialisation in fundamental equity analysis.

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