Mid-Year Market Check-in: From Tariffs to the Brink of War and Back

2025’s perfect storm began with President Trump exhibiting his trademark unpredictability, announcing sweeping tariffs that sent markets into a tailspin in April.

When tariff fears peaked in April, the S&P 500 sold off as much as 17.8%, while the Nasdaq suffered an even steeper 23.4% decline from its highs. Oil futures fell to four-year lows of $55.12 per barrel as investors geared up for a global economic slowdown, possibly even stagflation.

Just as markets were digesting the trade uncertainty, geopolitics began to dominate the headlines. Israel's surprise attack on Iran's nuclear facilities, followed by the US bombing Iranian nuclear sites, sent shockwaves through global markets. Oil prices whipsawed, rising above $80 per barrel before a Trump-brokered ceasefire saw them sliding more than 9% in a single session to settle at around $64.

The rand also felt the impact of Middle Eastern hostilities, weakening from R17.70 to R18.15 against the dollar as investors fled into the dollar.

Markets make a surprising comeback

But financial markets made a surprisingly quick comeback. As Morgan Stanley’s strategist Michael Wilson notes, “History suggests most geopolitically-led selloffs are short-lived/modest.” That has certainly been the case during this unprecedented period.

By mid-year, US stocks had clawed their way back out of negative territory. The S&P 500 now sits just 1% below its February peak, while the Nasdaq has experienced its first record close since February.

What this means for investors

While risks still abound, the one lesson investors can take away from the first half of 2025 is that they shouldn't let fear drive their investment decisions. As Barclays strategist Emmanuel Cau says, "It's dangerous for investors to overreact on such events, which typically turn out to be entry points rather than lasting selloffs."

However, this doesn't mean investors should ignore the very real risks still brewing beneath the surface. Tariffs are expected to push inflation above 3% by the fourth quarter, with Fed chair Jerome Powell already signalling that central bankers will likely wait until September before considering rate cuts. The oil market also remains highly vulnerable to any further escalation in Middle East tensions.

Navigating the second half

As we enter the second half of 2025, the investment landscape remains as unpredictable as ever. In this environment, diversification remains the new safe haven.

Rather than betting everything on traditional refuges that are losing favour, like US Treasuries, or gold (which has just surged past $3,000 per ounce), spreading risk across multiple asset classes and geographies offers the most reliable shelter from any ongoing storms.

If you have any questions about how all of this affects your investment portfolio, please give us a ring.

Disclaimer The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for professional, detailed and appropriate advice.