Current Events

Trumps rambling speech on “Liberation Day” propped using a sheet of cardboard and some questionable maths delivered a wave of tariffs across the globe, taking aim at almost all countries friend or foe and even those pesky penguins on their uninhabited island. The main ire this time was directed at Vietnam, India, China, and the EU, further intensifying global trade tensions and stock market volatility. While intended to bring manufacturing jobs back to the US, these tariffs are already having a significant effect across international supply chains, domestic markets and stock exchanges.

The Chaos: Trump 2.0 = Global Market Uncertainty

As Donald Trump returned to office in January 2025, global stock markets were once again thrust into a state of heightened volatility. His second presidency, much like his first, brings with it his unique blend of uncertainty, policy shifts and off the cuff remarks, all of which have a global impact. The memories of his previous term not quite yet forgotten,  investor sentiment was nervous but hopeful as Trump 2.0 took office. But as we face another wave of market turbulence, the lesson from Trump's first presidency is clear: riding out volatility can often be the wisest strategy.

Barely 3 months in and already in 2025, we’ve seen sharp swings in stock prices, with global indices reacting to policy announcements, geopolitical developments, concerns over the U.S. economy and a global trade war

History

A similar picture of market turbulence was seen  in Trump 1.0 where the  world’s stock markets experienced both rapid growth and sharp declines. Early in his first term, Trump's tax cuts and pro-business agenda fuelled significant market rallies, with the S&P 500 gaining approximately 67% by the end of his presidency. However, this period was also marked by the U.S.-China trade war bringing uncertainty and volatility to global markets.

Tariffs introduced by Trump against China saw a number of US companies move manufacturing from China to Vietnam. With Trumps latest announcement of a vicious increase in tariffs, Vietnam is now in the headlights.  Take Nike, a brand now rooted in Vietnam where 50% of its products are made. New tariffs on imported goods from Vietnam directly increase the cost of production for them and similar companies that rely on overseas manufacturing. These increased costs in turn are likely to be passed on to US consumers, leading to higher retail prices

Economists widely agree that tariffs act as a tax on imports, and while they may benefit specific domestic industries in the short term, they tend to raise prices and reduce choice for consumers.

Perhaps the most significant event during Trump’s first term was the COVID-19 pandemic in 2020, which triggered a historic market crash. The initial panic saw global indices plummet, with the S&P 500 falling by over 30% in March of that year.. However, those who remained invested saw the market rebound quickly, reaching all-time highs just months later. Investors who held their nerve through the crash benefited from one of the fastest recoveries in history.

Looking further back there have been a number of major drawdown events leading to significant market falls

1974 - Oil crisis: -55%

1987 – Black Monday: -22%

2000 – Dot Com Bubble (Tech stocks): -47%

2008 – Global financial crisis: -30%

2020 – Covid: -30%

Following each of these major economic events we have seen markets recover to reach new all-time highs. With this historical context, it shows that while Trump's policies and global events can cause short-term market disruptions, the long-term outlook for markets tends to remain positive, especially when supported by strong fundamentals like corporate earnings and innovation.

We show below how the major markets have performed over the last 10 years.

Market Volatility is Inevitable with or without Trump

Volatility is a natural and inherent part of investing. Political shifts, economic policies, and unforeseen global events have happened throughout history and can cause markets to react sharply in either direction. Trump's unpredictable leadership style has added an extra layer to this, but it’s important to remember that markets have proven to be resilient over time.

In the short term, we can expect these fluctuations in share prices to continue. However, periods of volatility do not necessarily indicate the loss of investment opportunities. On the contrary, many long-term investors have historically benefited from staying invested through these uncertain times.

Attempting to time the market (selling out when uncertainty is high and re-entering when stability returns) is a challenging and often a losing strategy. Missing just a few of the best-performing days can significantly reduce long-term returns, as was evident during the pandemic recovery, where those who exited the market missed out on the initial rapid gains that followed.

Fuelling the Fire(sale): The Magnificent 7 and trackermaggedon

The so-called “Magnificent 7” — Apple, Microsoft, Amazon, Alphabet (Google), Meta, Tesla, and Nvidia — have driven a significant portion of US equity returns over the past year. These tech giants surged, particularly through 2023, fuelled by AI optimism, strong earnings, and their dominant positions in the global economy. Year-to-date, however, some cracks have begun to show, with this cohort now experiencing a sharp pullback.

One of the forces that contributed to both their rise and current decline is the role of passive investment strategies. As billions of dollars flowed into index-tracking funds, the largest companies — which carry the biggest weights in indices like the S&P 500 — benefited disproportionately. This created a feedback loop: the more they rose; the more capital was allocated to them. Passive investing is not truly “passive”; it is "momentum" investing, so in periods of market stress, that "momentum" works in reverse i.e. enhances the fall in valuations. As investors sell out of index funds, the largest companies see the greatest outflows, putting downward pressure on their share prices — regardless of individual business performance.

Investment Trusts  

Investment Trusts are the opposite of the passive tracker funds, a peculiarly British investment vehicle, and our preferred method of investing. The structure of Investment trusts can offer a number of advantages during periods of market stress. Unlike open-ended funds, investment trusts are closed-ended, meaning they do not have to sell holdings to meet investor redemptions when markets fall. This allows their managers to maintain long-term investment positions and take advantage of market dislocations, rather than being forced into defensive moves.

Moreover, investment trusts can borrow money (known as gearing), which can enhance returns when used carefully — particularly when high-quality assets are temporarily mispriced. In volatile times, trusts often trade at wider discounts to the value of their underlying assets, providing investors with opportunities to buy strong long-term assets at a lower entry point. These characteristics make investment trusts an appealing option for long-term investors looking to stay calm and capitalise on volatility.

Riding Out Volatility: The Long-Term Approach

In this renewed period of uncertainty, our message to investors is to remain patient. Emotional decision-making often leads to selling at the worst possible moments, locking in losses and missing the subsequent rebound.

Matthew Beddel , the manager of one of our favourite funds, Havelock,  gives a very good analysis of where we are and where markets are likely to go. Of course his comments only amount to an opinion but given his fund’s track record to date (past performance is not necessarily a guide to future performance) his analysis is well worth reading HERE.

While this may feel unsettling in the short term, we view it as a natural and often irrational feature of market volatility. This reinforces our belief in the value of active management — especially in volatile markets. Good active managers can look beyond the index, focus on valuation, and identify quality businesses that may be overlooked or undervalued by wholesale sell offs.

We appreciate these events can be stressful, if you wish to discuss your portfolio please contact us.  As always, we continue to monitor the situation closely and will adjust our outlook if the facts change. For now, maintaining discipline and focusing on long-term goals continues to be the most prudent course of action. We will update this page with information as events progress. Please follow Hamilton on LinkedIn or Facebook for notifications on updates.