Since the beginning of the year, global stock markets have delivered mixed results, almost the inverse of recent years. Initially, people were optimistic about the US economy with markets priced for US exceptionalism to continue. Economic policies under the Trump presidency were expected to be very favourable for markets, especially the US. However, recently, stock prices in the US have fallen while other regions have delivered positive results. In fact, the US market even went into a ‘market correction’ down over 10% from its all-time high. Here are some of the reasons for this:
- US stocks, especially mega caps and technology stocks, had outperformed in 2023 and 2024 and expectations for further gains had push valuations to unsustainable levels.
- The US government-imposed taxes on goods from countries like Mexico, Canada, and China, potentially making trade more expensive.
- Elections in Germany and the US’s mixed feelings about helping Ukraine have led European countries to spend more on defence, boosting the share price of defence companies in Europe. This has also increased growth expectations for Germany and Europe supporting stocks in the region more broadly.
- Positive news about Chinese companies has boosted their stock prices.
In simple terms expectations for the US market were very high and expectations for other markets very low, meaning it didn’t take much ‘bad news’ to push US markets down or ‘good news’ to push the like of China and Germany into near bull markets.
As a result, US stocks, especially big tech companies, have not performed well, while stocks in other countries, particularly China, Europe, and the UK, have done better.
The chart below shows this divergent performance since the start of 2025:
The past week has seen dramatic movements off the back of President Trumps Tariff announcement. Significant value has been wiped off the value of the Worlds Stock Markets in a short space of time.
Do you have a long term strategy in place which you understand and are comfortable will see you through to the other side of this volatility?
Lessons for Investors
- Price Matters: Focusing on the difference between price and intrinsic value is crucial. Overpay, and there is a greater chance of losing money in the long-term.
- Uncertainty: It’s important to have a diverse mix of investments to handle unexpected market changes.
- Robust Portfolios: Investors should prepare their portfolios to withstand different economic and market situations.
- Don’t panic: Volatility can bring with it opportunities to enhance a portfolio and deliver long term returns. Some US companies are starting to look more attractive
Adding to the complexity of the current investment outlook, the noise in whatever media you consume around tariffs and what Trump is saying hour by hour – is quite simply overwhelming.
Periods such as this for Investors can cause anxiety and confusion as to what to focus on and what to ignore, particularly if you are approaching retirement or relying on your superannuation to live on in retirement.
Curve Wealth offers only truly Independent Financial Advice, which is always in the best interests of our clients. If you would like the opportunity to sit down with an Independent Financial Adviser and discuss the current situation world markets are experiencing and what is important as an investor to focus on, we would be happy to do so.
Curve Wealth as an Independent Financial Advice Firm provide services to clients on a fee for service basis. If you would like to sit down with an Independent Financial Adviser for a meeting to discuss any concerns you may have regarding your Investment Strategy, we can do so for a fixed cost of $350 + gst. In this meeting you would receive general advice on your overall situation and the current outlook.
Please get in touch with us if you would like to discuss an appointment with an Independent Financial Adviser. You can contact us on 03 9588 9000 or [email protected]
