CFS view of market response to US tariffs

Hello, my name is Jonathan Armitage, I'm the Chief Investment Officer at Colonial First State.

In recent weeks, we have seen the Trump administration impose tariffs on a range of its trading partners, ranging from 10% here in Australia to between 35 and 40% to a number of its Asian trading partners.

This has impacted market expectations to a much greater degree, partly because markets have been anticipating that the average rate of tariffs would be around 10%, whereas actually what was announced last week was closer to 25% across the board.

This has raised concerns about the future growth, not just in the US, but also across Europe and the rest of the world, and also raised the possibility that inflation, and therefore interest rates, would be much higher than investors had previously anticipated.

In recent months, the CFS investment team had been looking at ways that we could mitigate potential volatility in our investment portfolios. We've made some changes by reducing our exposure, first of all, to US equities

and then more recently reducing our exposure to US technology companies, primarily driven by concerns over the elevated valuations that you'd seen in those securities.

We've also made some changes in our fixed income portfolios by allocating more money to domestic fixed income here in Australia, where yields have been a lot more attractive than you'd seen in other parts of the world.

It is natural that investors would be concerned about some of the volatility that we have seen in recent days. However, it's important to remember that superannuation is a long-term investment.

History has shown that despite the volatility that we may see from time to time, holding the course and maintaining your investments for the long-term serves the superannuation members much better than trying to time markets in the short term.