Iain Anderson, Head: Investments at Sygnia
Global stock markets are currently experiencing one of the fastest downturns in history, with major indices across Asia, Europe and the United States (US) falling, wiping $9.5 trillion off the MSCI All-Country World Index since 2 April. The speed and breadth of US President Donald Trump’s tariff announcements caught markets off guard, leading to stop-loss triggers, forced deleveraging and panic selling. The Nasdaq Index in the US has already entered bear market territory on a drop of over 20% from its recent high, while the Dow Jones Industrial Average experienced its largest drop since the Covid-19 pandemic.
To put the numbers in perspective, however, markets dropped by 57% during the Global Financial Crisis of 2008 and by 33% with the Covid 19 announcement.
Several interconnected factors contributed to the “Liberation Day” crash, which started on 2 April, 2025. The primary trigger for the sell off was investor uncertainty over President Trump’s escalation of global trade tensions. His administration implemented sweeping tariffs on imports from just about every country and is expected to raise the average tariff rate to approximately 19% in 2025 from 3% previously. These tariffs have sparked fears of a global trade war and a potential recession in the United States, the world’s largest economy. China has already retaliated with 34% tariffs on US goods, further exacerbating the situation and leading to concerns about reduced global demand and disrupted supply chains. The EU has held back on unveiling its real anti-coercion tool – retaliatory tariffs on services, not just goods.
Perversely, current fundamentals, such as a still-resilient labour market, suggest the US economy is not collapsing, and cool heads in non-US governments could lead to reduced tariffs and a quick recovery. According to US Treasury Secretary Scott Bessent, more than 50 countries have reached out for trade talks – Taiwan has offered to cut all tariffs on US imports, India has said it is open to cutting tariffs on more than half of its US imports, the EU has committed to negotiations and UK PM Keir Starmer has highlighted the need for a “cool-headed” approach. Japan was the first to open the door for actual negotiations, with its stock market up 6% this morning on the news.
However, markets were not just spooked by the US’s announcement of its biggest tariff hike in history, but by the fact it was not voted for by Congress; it was decided by one man, President Trump, via an executive order issued under emergency powers. There is no precedent for developed countries to negotiate trade policies in this manner. In anticipation of increased volatility around tariffs, we have been proactively managing risk by reducing our equity weighting since the start of the year, and we further reduced our holdings last week after the tariffs announcement.
During times of heightened market volatility – like the present – it is important to remember that market corrections are a normal part of economic cycles and, while risks remain high and the outlook is very obscured by tariff uncertainty, analysts foresee potential for market recovery. JP Morgan analysts estimate the S&P 500 will trade between 5 200 and 6 000 over the next year, while Goldman Sachs is forecasting a range of 5 300 to 5 900 – compared to Friday’s close of 5 074. Markets will trade to the top of that level as countries negotiate lower tariffs and will fall as countries retaliate.
While it is tempting to sell in a panic, more people selling drags down the markets and only serves to lock in losses. History and sound financial advice remind us that investing is a long-term game and that market cycles come and go. A diversified portfolio and a long-term perspective should mitigate short-term volatility, turning today’s uncertainty into tomorrow’s opportunity. We remain cautious and underweight risk but are looking for opportunities to reinvest.
ENDS
