Note: This market review was penned on 7 April 2025. As of 10 April 2025, markets have risen by approximately 10%. However, given the ongoing volatility and uncertainty, we believe the observations and analysis below remain highly relevant and continue to provide important context for the current environment.
Executive Summary
The uncertainty surrounding the impact of tariffs has intensified since the US announced higher tariffs on 2 April 2025. In this market review, we examine how markets, funds, and our portfolios have performed since the announcement. We explore how tariffs affect businesses and explain why the stock market sell-off, though uncomfortable, is rational. Additionally, we provide guidance for investors to consider when reviewing their portfolios during these uncertain times, along with insights from our Senior Advisor, Dr Peng Chen.
Key Updates
Typically, we would begin by reviewing the previous month’s fund performance in our market review updates. However, in light of the significant events surrounding ‘Liberation Day’ on 2 April 2025, past performance has become somewhat less relevant. Instead, we will focus on sharing the current performance of funds, markets, and our portfolios as of 7 April 2025 (the time of writing), both on a year-to-date and month-to-date basis. The first few days of April have seen a dramatic impact across portfolios and funds, and the market remains volatile as ongoing uncertainty around tariffs continues to affect global markets.
Exhibit 1: Market Indexes – Year-To-Date and Month-To-Date 7 April 2025 in USD
Looking at the market indices above, we can observe that the majority of the fall in stocks has happened since the start of April. On a year-to-date basis, we can see that US stocks are performing worse than the diversified global indices, and Emerging Market stocks have outperformed during this period. Bonds (Bloomberg Global Aggregate) have held their value as a stabiliser for portfolios.
Exhibit 2: Equity Funds – Year-To-Date and Month-To-Date 7 April 2025 in USD
When we look at the equity funds, we can see that in general, the Dimensional Funds have been outperforming the indices, as value stocks are doing better. For example, the Dimensional Global Core Equity Fund is -10.75% year-to-date, which is almost 1% better than the MSCI World Index Fund from Amundi at -11.53%. However, small caps have struggled, as seen in the Global Targeted Value fund. If not the outperformance from Dimensional Funds would have been greater.
Exhibit 3: Fixed Income Funds – Year-To-Date and Month-To-Date 7 April 2025 in USD
Fixed Income has fared a lot better in this period, as investors have gravitated towards less risky assets during this period of uncertainty. We can see that short-term bond funds (Dimensional short-term bond funds) have done extremely well, delivering positive returns for investors and not experiencing any volatility. The intermediate-term Global Aggregate Index fund from Amundi has also delivered positive returns as investors fled to safer assets, while the Dimensional Global Core Fixed Income fund has maintained a positive year-to-date return.
Exhibit 4: Providend Portfolios – Year-To-Date and Month-To-Date 7 April 2025 in USD
Turning to portfolio performance, we can see that diversification across geography and factors has helped to mitigate the risk. The MSCI ACWI IMI has fallen 11.3% year-to-date (Exhibit 1), but our Equity portfolio is down 10.53%, representing a 0.8% outperformance. If you are invested in a less risky portfolio with a larger allocation to fixed income, such as the Balanced portfolio, it is down around 6% year-to-date, and our Low Risk portfolio that is heavily invested in Fixed Income is down 1.44% year-to-date. A large part of the risk management comes from your wealth plan, as your advisers would have allocated you to the appropriate portfolio based on your risk tolerance.
Exhibit 5: Providend Portfolios – Year-To-Date and Month-To-Date 7 April 2025 in SGD
In SGD terms, we see some slight differences as the SGD has strengthened against the USD in 2025. One thing to draw attention to is the outperformance of the Income portfolio. As a 60/40, the asset mix is equivalent to our Balanced portfolio, but on a year-to-date basis, it is outperforming by 3.2%.
Why Are Stocks Responding Negatively to Tariffs?
Here is a brief overview on why stocks globally have been responding negatively to tariffs.
To illustrate, let’s examine how tariffs could impact Nike’s stock price. Nike’s primary business is footwear, with its primary manufacturing bases located in China, Vietnam, and Indonesia, where tariffs of 76% (cumulative, including previous tariffs), 46%, and 32%, respectively, have been imposed, respectively. Now, let’s consider a hypothetical scenario:
If we look at the above table, it helps us to understand the impact that tariffs could have on profits. This hypothetical scenario is, of course, simplified and basic, but it serves to highlight the challenge the company faces.
The company’s earnings are likely to drop, so it will need to adjust in a few potential ways.
- Raising prices: This could help offset some of the lost profits, but it would likely also reduce revenue as higher prices would make the shoes less affordable for consumers.
- Asking the supplier to cut prices: This is a possibility, but then the challenge would be the supplier’s own business losing profitability, which might cause the supplier to give up the contract (which would affect the supply of goods to Nike, thus reducing their revenue).
- Absorbing the cost increase and sharing the burden with the supplier: This would reduce profits for both Nike and the supplier.
All these scenarios lead to lower profits for Nike, which is why investors reacted by selling the shares, expecting future earnings to be lower for the company.
When magnified across almost all companies, due to the global supply chain, companies will either be importers or suppliers, which helps us understand why stocks were sold off across Japan, Europe and the US.
If most companies are likely to experience lower profits, they will either pivot their business by cutting costs and reducing investment, leading to slower economic growth and potentially a recession. JP Morgan has raised the odds of a global recession from 40% to 60% after the tariffs were announced. Therefore, we can see that investors are acting rationally by adjusting the prices of stocks lower, anticipating that companies will earn less in the future.
What Does This Mean for Our Portfolios Going Forward?
We understand it might feel like the news has been challenging lately, but we’d like to gently share with you a few key concepts to keep in mind, as we weather through this volatility.
1. Businesses Can Adapt:
We invest in businesses, and businesses are always adapting. We’re already seeing companies actively work to mitigate the impact of tariffs, whether by adjusting supply chains, altering prices, or a combination of both.
2. The Strength of Diversification:
Diversification ensures that you’re always invested in businesses that perform well in any market condition. While most stocks saw significant declines in early April, sectors like consumer staples were more resilient. Companies such as Coca-Cola, Procter & Gamble, and McDonald’s fell by around 5%, compared to the broader S&P 500’s 10% drop and Apple’s 17.5% decline (which is more exposed to tariffs). The Hang Seng Index (Hong Kong and China stocks) is still up around 3% for the year. Our portfolios’ broad diversification means we hold stocks from various industries and geographies, enabling us to benefit from the top performers in any period.
3. The Market’s Ability to Find a New Equilibrium:
The world will eventually find a new equilibrium. Throughout history, we’ve faced numerous short-term uncertainties, including the COVID-19 pandemic, wars, and economic or inflation fears. However, each time, after the uncertainty subsides, a new equilibrium is reached, and businesses continue to operate, delivering returns to shareholders. As the chart below illustrates, markets have always recovered over time, no matter the size of the shock.
Source: Dimensional Fund Advisors
How to Stay Calm and Make Wise Decisions in Tough Times
We would like to share valuable insights from our Senior Advisor, Dr Peng Chen, on how to navigate the current uncertainty:
1. Avoid Short-Term Decisions Amid Noise
There will be many opinions and views on what will happen. Contradicting views already exist among “experts.” There will be a lot of noise, and this often induces investors to make short-term investment decisions and trade. Time and time again, it has been proven that when things are unclear and there is a lot of noise in the market, it is wise to take a step back and not rush into decisions, rather than trying to time the market and profit from rapidly changing market events.
2. Assess the Impact of Tariffs on Your Finances
Examine how the tariffs will impact your overall financial health. Is your job or income directly impacted? Are your assets or liabilities being affected? For example, one of my friends’ businesses manufactures Christmas lights in China and exports them to the US market. His business was significantly impacted between 2018 and 2020 when the US increased tariffs on Chinese-manufactured goods. Many of his peers moved their factories to Southeast Asian countries, but he did not. He had to close down his business and transition to other areas.
If your business and income are directly impacted, you will need to re-evaluate your balance sheet, cash flow, financial goals, and risk tolerance, and then make a more informed decision on your asset allocation.
3. Review and Diversify Your Portfolio
After reviewing your financial situation, the next step is to re-examine your portfolio to ensure it is still a good fit for your goals, financial situation, and risk tolerance. The most important thing to do is to ensure it is well-diversified. With the amount of uncertainty introduced by US policy changes, it is even more critical to ensure your portfolio is well-diversified across different asset classes—stocks, bonds, and cash—as well as geographic regions: the US, the EU, Japan, China, emerging markets, etc. Diversification is the only proven approach to reducing risk. Trying to time the market or picking the “winning” countries is very dangerous.
For most individual investors, there is a tendency to invest more in one’s own country. Now is the time to re-examine this and ensure that at least a good portion of your portfolio is allocated to other countries.
4. Ensure Adequate Emergency Savings
It is also a good opportunity now to review whether you have six months’ worth of emergency savings set aside. If you do not, it would be wise to start setting aside an emergency fund.
The Role of Your Wealth Plan
Your personalised wealth plan is designed to address these steps, with sufficient emergency funds, a well-diversified portfolio, and the ongoing support of your adviser to guide you at every stage, ensuring that you have the highest probability of achieving your life goals.
We understand that this is a challenging time, but please know we are here for you every step of the way. Feel free to reach out to your Client Adviser if you’d like to discuss your wealth plan or have any questions. We deeply appreciate your continued trust and support.
For more related resources, check out:
1. What Investors Should Know About the US Reciprocal Tariff and Market Volatility
2. Staying the Course: Investing With Confidence in Uncertain Times
3. Financial Lessons From the Garden
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