Issue link: https://info.seic.com/i/1537928
A Year In The Markets. Q3 2024 The US central bank cut interest rates by 0.5%. Why is it news? Markets were expecting a more modest 0.25% cut, making the 0.5% reduction a surprising move. The decision came as inflation approached the Federal Reserve's target, shifting their focus to stabilising a weakening job market and addressing rising unemployment. Does it really matter? Rate cuts typically benefit stocks by encouraging investors to move capital from low-yield savings and bonds to higher-return equities. However, if rate cuts are perceived as a pre-emptive measure to stave off a recession rather than a response to stabilised inflation, markets may react negatively. Q4 2024 Donald Trump elected US President again in stunning political resurrection. Why is it news? Four years after leaving the White House, Donald Trump has been given a second chance by millions of American voters and is now the 47th President of the United States. His re-election follows a tumultuous period, including surviving two assassination attempts and a criminal conviction. Does it really matter? In this new Trump era, expectations include aggressive international trade tariffs, stringent immigration policies, and significant tax cuts. These policies could potentially lead to higher inflation and interest rates. The Federal Reserve may need to tread cautiously when cutting interest rates, despite potential pressure from the White House. Q1 2025 US tariffs shake global trade, sparking economic uncertainty. Why is it news? The US ramped up tariffs in early 2025, reigniting global trade tensions and unsettling markets. These measures signal a shift toward economic protectionism, with potential consequences for global supply chains, inflation, and geopolitical stability. Does it really matter? Higher tariffs could drive up consumer prices, disrupt international trade, and strain diplomatic relations. If global economies retaliate, it may slow economic growth and add uncertainty to an already fragile post-pandemic recovery. Q2 2025 June strikes between Israel and Iran fuel fears of direct conflict. Why is it news? The strikes mark a major escalation in Middle East tensions with potential global repercussions (like what? Supply chain, oil, broader conflict). Israel's airstrikes on Iranian military sites, followed by US attacks on nuclear facilities, raised fears of a broader regional conflict. The risk to global energy supply routes, particularly through the Strait of Hormuz, has pushed geopolitical risk sharply higher. Does it really matter? Markets have remained calm, suggesting confidence that the Trump-brokered ceasefire will hold. While risks persist, we see a major escalation as unlikely. Iran cannot disrupt regional oil exports without also threatening its own. Iran is also unlikely to jeopardise its relationship with China, a key strategic partner and major buyer of Middle Eastern oil. Source: SEI IMU 3