- Investment Strategy Analyst
Asset classes
Hong Kong (香港), Individual
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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed.
The bravado of the Liberation Day tariff announcements, framed as a “declaration of economic independence,” sought to employ draconian measures to force a rapid rebalance of global trade, with 10% baseline tariffs and country-specific tariffs as high as 145%. Markets were caught off guard and likewise rapidly began to plummet. Investors who sold, fearing the implications of an abrupt end to globalization, would be dismayed when a 90-day moratorium announced a week later sent markets skyrocketing on hopes for a better trade outcome.
Following drawdowns, markets can often snap back and retrace losses quickly. While the catalysts vary over time, history has often made the case for staying invested. Since 2000, a formal market correction (i.e., exceeding -10%) has occurred roughly every other year on average, including in many years ending in significant positive territory. 2025 is no different, with investors who missed out on the April 9 bounce back lagging the S&P 500 by an astonishing -8.7% year to date as of writing.
We may not be out of the woods on final tariff policy, but remaining engaged with the market and building a diversified portfolio to withstand periods of volatility could be perennial tried and tested advice for investors.
Investment implications
- Fixed income also experienced volatility during the equity drawdown due to inflation and US credibility concerns. As global policymakers loosen monetary and fiscal policy in response to trade-related shock, concerns about a higher inflation regime could elevate bond-equity correlations. Consider alternatives like privates and hedge funds to mitigate overall portfolio drawdown risk.
- Investors should be ready to act when markets diverge from fundamentals —especially since rebounds often follow drawdowns. Surprises in economic print from expectations could create temporary pricing dislocations, as markets tend to overreact to unexpected data versus the actual levels of inflation or growth, the latter of which matters over the long term.
- Volatile markets offer an opportunity for self-reflection on portfolio objectives and tolerance of risk for return needs. Investors with longer time horizons, for example, might be less concerned with any potential bond volatility, given higher yields offer an attractive entry point to produce income, which could facilitate compelling total returns over time for multi-asset portfolios.
What we are watching
- Global equities, even the US, are now largely in positive/near-positive territory despite more pronounced tariff risks compared to the start of the year. While the April correction perhaps reflected the market’s worst fears on trade policy, the recovery so far is largely based on temporary truces that may or not be indicative of final tariffs. Trade policy needs to crystallize further, while uncertainty could create distortions in economic print as trade patterns shift ahead of final outcome.
- Global fiscal expansion. While China and Germany notably boosted fiscal stimuli to address growth challenges prior to Liberation Day, the trend has accelerated as more countries may seek to potentially ward off the adverse effects of tariffs. Such measures may be catalysts for reinflation as well as disparate outcomes in regional growth. Monitor US and Japan upcoming budget proposals.
- Corporate earnings resilience as figures begin to reflect the uncertainty of the tariff climate, with potential for companies to delay decision making and a more cautious consumer. Sector and regional winners could emerge based on supply chains and global revenue exposure in light of final trade policy.
