Richard Warne, Senior Portfolio Manager, Copia Capital
It has been an eventful and often volatile start to the year for global markets. The first quarter of 2025 saw significant drawdowns, but this was nothing in comparison to what markets endured from April 2nd and the trading days that followed, largely driven by the economic policies of the US and Donald Trump.
A constantly moving feast
At the end of Q4 2024, markets rose sharply following Donald Trump’s election as US President. Much of the optimism was underpinned by expectations of deregulation and tax cuts from the new administration. However, as Q1 2025 progressed and the administration took office, the narrative quickly changed. Markets began to lose confidence as concerns grew over the likelihood of US tariffs on imports.
This period of volatility was worsened by Trump’s ‘Liberation Day’ on 2 April when he revealed a host of further tariffs. Every economic region faced a baseline tariff of 10% (including the UK, Australia and Singapore), with even higher rates levied on those countries with significant trade surpluses with the US – such as China (34%), the EU (20%) and Vietnam (46%).
Markets reacted in a dramatic fashion. On ‘Liberation Day’, the S&P 500 and the Nasdaq fell by 6.0% and 6.1% and the FTSE All Share by 4.8%, while the Nikkei 225, Hang Seng and the DAX dropped by 7.8%, 13.2% and 5.0% respectively.[1] A sense of widespread panic took hold across markets, margin calls were triggered which meant investors were forces to sell assets. Morgan Stanley, a major hedge fund broker was quoted in the Financial Times as describing the following day, Thursday 3 April, as “the worst day of performance for US-based long/short equity funds since it began tracking data in 2016”.[2]
At a recent adviser webinar, we asked participants if they thought the policy would ‘Make America Great Again’ and 90% said no.[3] Given the market turmoil it has generated, it’s certainly challenging for investors to grasp the Trump administration’s end game. Some commentators have suggested it’s a ‘dead cat on the table’ tactic: a deliberately extreme and confusing position used as a starting point for negotiations to force others closer to the desired outcome. We’ve certainly seen some rolling back on the initial announcement. This included a pause on most tariffs (with the exception of China) and exemptions granted on certain tech products without a US manufacturing base, such as smartphones and PCs.
As a result, some tech stocks, Apple in particular, swiftly rebounded and international markets rallied. Markets are a forward pricing mechanism and can reprice rapidly. Looking at the S&P500 and the FTSE100, markets have recovered around 50% since the initial sell-off, illustrating how quickly sentiment can shift.
Negotiation versus retaliation
Going forward, the performance of global markets in the face of tariffs will be highly dependent on how key actors respond if tariffs are implemented after the current pause. The longer tariffs remain in place, and the wider their reach, the more disruptive they could be to supply chains, with potentially significant cumulative effects.
So far, China has promised to fight fire with fire, though there have been signs in both camps suggesting the possibility of negotiation. The EU has hinted at a more balanced approach with prevailing sentiment in the bloc favouring free trade, but if pushed they could become more aggressive. Japan has indicated a keen desire to avoid tariffs and geopolitically, given China’s growing regional influence, is keen on retaining American security interests. Tokyo is hoping that its substantial financial investment in the US, alongside the fact that many Japanese countries base significant manufacturing operations there, will work in its favour.
The UK would only see a baseline tariff and has so far, played its hand carefully to avoid rocking the boat. Downing Street has indicated a desire to negotiate directly on specific industries like automotive, pharmaceuticals and agriculture.
Looking ahead
It is important to emphasise that this is a fast-changing situation, and the general recommendation is to hold assets and wait for things to calm down. This is in line with client sentiment – in a poll during our recent webinar participants reported that 71% of clients favour holding their investments, while 18% are looking to invest more and 11% want to move into cash.[4]
As previously mentioned, it is hard to gauge Trump’s ultimate aim: whether tariffs are being used to bring manufacturing back to the US, as a negotiation tactic or both. However, there are indications, for instance, the exemptions in the tech sector and shifts in negotiating rhetoric, that tensions could ease.
The key takeaway continues to be for investors to stay the course during these periods of instability. Timing the market is incredibly difficult: anyone who sold between 4 and 8 April would have missed out on historically one of the best days of trading on 9 April. The response of other economies will be critical as we move into the second quarter and beyond, and get more insight into Trump’s endgame, but, as always, there are opportunities for long-term investors.
Watch the recent Quarterly Market review >
This article is intended for regulated financial advisers and investment professionals only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.
[1] Market Watch
[2] Financial Times / Morgan Stanley
[3] Quarterly Market Review – US Special – April 2025
[4] Quarterly Market Review – US Special – April 2025
7th May 2025
Market update: Quarterly Market Review Q1 2025
Richard Warne, Senior Portfolio Manager, Copia Capital
It has been an eventful and often volatile start to the year for global markets. The first quarter of 2025 saw significant drawdowns, but this was nothing in comparison to what markets endured from April 2nd and the trading days that followed, largely driven by the economic policies of the US and Donald Trump.
A constantly moving feast
At the end of Q4 2024, markets rose sharply following Donald Trump’s election as US President. Much of the optimism was underpinned by expectations of deregulation and tax cuts from the new administration. However, as Q1 2025 progressed and the administration took office, the narrative quickly changed. Markets began to lose confidence as concerns grew over the likelihood of US tariffs on imports.
This period of volatility was worsened by Trump’s ‘Liberation Day’ on 2 April when he revealed a host of further tariffs. Every economic region faced a baseline tariff of 10% (including the UK, Australia and Singapore), with even higher rates levied on those countries with significant trade surpluses with the US – such as China (34%), the EU (20%) and Vietnam (46%).
Markets reacted in a dramatic fashion. On ‘Liberation Day’, the S&P 500 and the Nasdaq fell by 6.0% and 6.1% and the FTSE All Share by 4.8%, while the Nikkei 225, Hang Seng and the DAX dropped by 7.8%, 13.2% and 5.0% respectively.[1] A sense of widespread panic took hold across markets, margin calls were triggered which meant investors were forces to sell assets. Morgan Stanley, a major hedge fund broker was quoted in the Financial Times as describing the following day, Thursday 3 April, as “the worst day of performance for US-based long/short equity funds since it began tracking data in 2016”.[2]
At a recent adviser webinar, we asked participants if they thought the policy would ‘Make America Great Again’ and 90% said no.[3] Given the market turmoil it has generated, it’s certainly challenging for investors to grasp the Trump administration’s end game. Some commentators have suggested it’s a ‘dead cat on the table’ tactic: a deliberately extreme and confusing position used as a starting point for negotiations to force others closer to the desired outcome. We’ve certainly seen some rolling back on the initial announcement. This included a pause on most tariffs (with the exception of China) and exemptions granted on certain tech products without a US manufacturing base, such as smartphones and PCs.
As a result, some tech stocks, Apple in particular, swiftly rebounded and international markets rallied. Markets are a forward pricing mechanism and can reprice rapidly. Looking at the S&P500 and the FTSE100, markets have recovered around 50% since the initial sell-off, illustrating how quickly sentiment can shift.
Negotiation versus retaliation
Going forward, the performance of global markets in the face of tariffs will be highly dependent on how key actors respond if tariffs are implemented after the current pause. The longer tariffs remain in place, and the wider their reach, the more disruptive they could be to supply chains, with potentially significant cumulative effects.
So far, China has promised to fight fire with fire, though there have been signs in both camps suggesting the possibility of negotiation. The EU has hinted at a more balanced approach with prevailing sentiment in the bloc favouring free trade, but if pushed they could become more aggressive. Japan has indicated a keen desire to avoid tariffs and geopolitically, given China’s growing regional influence, is keen on retaining American security interests. Tokyo is hoping that its substantial financial investment in the US, alongside the fact that many Japanese countries base significant manufacturing operations there, will work in its favour.
The UK would only see a baseline tariff and has so far, played its hand carefully to avoid rocking the boat. Downing Street has indicated a desire to negotiate directly on specific industries like automotive, pharmaceuticals and agriculture.
Looking ahead
It is important to emphasise that this is a fast-changing situation, and the general recommendation is to hold assets and wait for things to calm down. This is in line with client sentiment – in a poll during our recent webinar participants reported that 71% of clients favour holding their investments, while 18% are looking to invest more and 11% want to move into cash.[4]
As previously mentioned, it is hard to gauge Trump’s ultimate aim: whether tariffs are being used to bring manufacturing back to the US, as a negotiation tactic or both. However, there are indications, for instance, the exemptions in the tech sector and shifts in negotiating rhetoric, that tensions could ease.
The key takeaway continues to be for investors to stay the course during these periods of instability. Timing the market is incredibly difficult: anyone who sold between 4 and 8 April would have missed out on historically one of the best days of trading on 9 April. The response of other economies will be critical as we move into the second quarter and beyond, and get more insight into Trump’s endgame, but, as always, there are opportunities for long-term investors.
Watch the recent Quarterly Market review >
This article is intended for regulated financial advisers and investment professionals only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.
[1] Market Watch
[2] Financial Times / Morgan Stanley
[3] Quarterly Market Review – US Special – April 2025
[4] Quarterly Market Review – US Special – April 2025