Markets may ebb and flow, but they trend upwards over time

On 10 March, the US stock market dropped sharply as a result of US President Trump’s refusal to rule out a US recession, and ongoing concerns about the tariffs his government has imposed against several countries.

This has had flow-on effects across global markets, including the Australian Stock Exchange, which fell as a result of the growing uncertainty.

Just as rapidly as it fell, the US share market rebounded on 14 March causing an uptick in the Australian sharemarket early this week. 

This sort of market rollercoaster ride is likely to continue as tariffs and cuts to US government spending affect the US economy in coming months.

Since Trump’s second presidency began, uncertainty has emerged about US policy in the areas of tariffs, defence and other critical areas of government spending. 

Over the past couple of weeks, shares have been quite weak, particularly US technology stocks. This group of stocks was optimistically priced after two years of strong growth, and therefore most at risk of uncertainty in the US market. 

This has unsettled businesses amid concerns the US economy could slow. It has also fed into uncertainty in global investment markets, including the Australian sharemarket.  

The CFS Investment team is experienced at managing unpredictability and has been preparing for market uncertainty for many months.  

We’ve been actively positioning our portfolios to reduce the effect of these risks, as well as to take advantage of the opportunities that we see coming out of this period. 

Our focus has been on diversifying investments, moving away from very large-cap technology companies and broadening our exposure to emerging markets, smaller companies globally, and income paying assets like credit.  

We are monitoring the performance of European equities, which have performed better than US equities since the US election. 

We have also reallocated funds away from global fixed income to domestic fixed income and private credit, as we believe those areas offer better income stability in uncertain times.  

These shifts aim to ensure that we focus on stable cash flows and also reduce our reliance on very high-growing sectors, which may be vulnerable at times of market fluctuation.