Navigating Market Turmoil and Trade Tensions – How Our Portfolio Holds Up

With tariff tensions rising and markets wobbling, we’re keeping a close eye on how things could unfold for the Australian market, both this week and over the next few months. Here’s our view, based on what we’re seeing across global trends and local data. This Week (April 7–11, 2025) We expect volatility to hang around the ASX this week. The recent U.S. tariff decision, 10% on Australian exports and even steeper rates on major trading partners like China, has already knocked the market down. The ASX has shed nearly 10% year-to-date, and we think more pressure is coming. Sell-Off Momentum Could Linger: Global markets are under pressure. Wall Street dropped sharply late last week, and Asia followed on Monday. If U.S. futures are any guide, we’re in for more weakness, and the ASX will likely follow suit. Fears of a global slowdown are driving sentiment, and that’s not going away overnight. Sectors Feeling the Heat: Resources names like BHP (ASX: BHP), Rio Tinto (ASX: RIO), and Woodside (ASX: WOW) might struggle further, given renewed concerns over Chinese demand for commodities. On the flip side, defensives such as Coles (ASX: COL) and Woolworths may hold up better, as we saw last week when they managed gains despite the broader sell-off. Aussie Dollar Under Pressure: The Australian dollar’s already taken a hit and could slide further if risk sentiment stays sour. A weaker AUD reflects both U.S. dollar resilience and softer commodity pricing. That said, if there’s any let-up in the trade rhetoric, we could see a short-term bounce. Eyes on the RBA: Rate cut expectations are building fast. There’s now an 85–90% chance of a move in May, and possibly a 50-basis-point cut if global growth worries intensify. This week’s data, like consumer confidence and trade numbers, could move the needle on how quickly the RBA acts. The Bigger Picture (April–June 2025) Looking past this week, we think the market’s trajectory will be shaped by how the tariff situation plays out, how China responds, and what the RBA decides to do next. Trade Disruption Could Bite: While the direct impact of U.S. tariffs on Australian goods is relatively small, about 0.2% of GDP, the bigger issue is what happens if China slows down. Reduced demand from China for iron ore or coal could hit Australian miners hard, and GDP growth could slip below current forecasts. All Eyes on China’s Next Move: We think China’s going to have to act soon. With counter-tariffs already in place and global trade disruptions starting to bite, Beijing is likely weighing up a large-scale fiscal stimulus package. It’s worth remembering what happened during the GFC, China stepped in with massive support, which helped Australia dodge a recession and boosted commodity prices. We wouldn’t be surprised to see something similar soon, especially with domestic consumption in China needing a lift. Market Correction Risk: We could be looking at a broader market correction, potentially another 10% to 20%, as investors adjust to a tougher global outlook. The ASX has already come off its highs from February, and further downside cannot be ruled out if sentiment turns more negative. RBA to the Rescue? The central bank left rates at 4.1% last week, but we’re now expecting a quicker pivot. ANZ is forecasting three cuts by August, and HSBC sees even more. Lower rates could provide some cushioning, especially for property and financial stocks, but tariff-related inflation might limit how far the RBA can go. Some Bright Spots in the Volatility: Not all sectors are equal in this environment. Exporters like Ansell (ASX: ANN) have taken a hit, but companies with a domestic focus or more diverse trade links could weather the storm better. Agricultural names might shift focus to Asia, and critical minerals producers could attract more U.S. interest as Washington looks for alternatives to Chinese supply. U.S. Recession Watch: U.S. recession risk is climbing, some forecasts now put the odds at 50% over the next year. That’s a clear risk for the ASX, given Australia’s exposure to global trade. But if trade tensions ease or tariffs are scaled back under pressure, we could see a rebound in equities by mid-year. Source: Polymarket – Sentiment (2025) What We’re Watching Closely China’s Response: Any new fiscal stimulus announcements from Beijing would be significant—particularly for mining and export-focused sectors. RBA Messaging: Governor Michele Bullock’s upcoming remarks, and the RBA’s May decision, will be key in shaping expectations. Commodity Prices: Iron ore dipped below $100/ton last week; that’s a red flag. Further weakness would be a big headwind for the ASX. Global Market Tone: If U.S. and Asian markets find some stability, we could see relief here. If not, the downside risk grows. Prepared, Positioned, Proven: Our Portfolio Handles the Heat We’re bracing for a bumpy week, with more downside likely as markets digest the tariff news and recession chatter builds. Over the coming months, there’s a lot riding on how China responds and how fast the RBA acts. If Beijing rolls out a major stimulus, like it did during the GFC, Australia could once again find support from rising commodity demand. For now, staying diversified and leaning into resilient sectors looks like the way through the noise. Source: Investor Pulse – Aggregated Portfolio (Growth/Income/Mining) (2025) [Click Here to Access Our Portfolio] Want to Participate in These Private Offers? If you qualify as a Sophisticated Investor under Section 708 of the Corporations Act, please email us your certificate so we can keep your eligibility up to date. 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