Key Takeaways 

• A volatile quarter, now overshadowed by April’s trade headlines: Markets were turbulent throughout the quarter, but attention quickly shifted in April following President Trump’s dramatic tariff announcements on what he dubbed ‘Liberation Day’ (2 April), particularly targeting China. The back-and-forth since then has added to global uncertainty.

• Global markets driven by policy moves: Investment markets experienced heightened volatility, much of it driven by politics rather than fundamentals. The inauguration of President Trump and the announcement of new tariffs caused sharp sell-offs, especially in US shares. Smaller companies and large technology stocks were hit the hardest, while bonds rallied (as yields fell).

• Australian equities – a mixed quarter, but outlook improving: Australian equities ended the quarter in negative territory, dragged down by a sell-off that started mid-February. Valuations, particularly in the banking sector, had become stretched, but forecast improvements support Innova’s increasingly more constructive view. With interest rate cuts from the RBA and moderating inflation, the domestic outlook has brightened. Australia’s economy is highly sensitive to changes in mortgage rates, so any rate cuts would provide welcome relief to consumers.

• Global equities – diverging returns: The US market (S&P500 and Nasdaq), including the high-profile ‘Magnificent Seven’ tech stocks, remained volatile. By contrast, European shares surged thanks to large government spending announcements in infrastructure and defence, along with more accommodative policy from the European Central Bank.

• Our base case: slow growth, not a recession: We continue to expect a ‘soft landing’—a slowing in global growth without a major downturn—unless unexpected policy shocks escalate. Risks of higher inflation and weaker growth remain elevated due to tariffs and geopolitical uncertainty. We remain defensively positioned but ready to take advantage of valuation-led opportunities, recycling capital where appropriate.