President Trump’s first 100 days in office mark a decisive shift in economic policy, with immediate effects rippling through financial markets worldwide. Businesses that once made expansion plans with confidence now find themselves reassessing capital investments as new trade policies alter their cost calculations.

Across America, manufacturers, retailers, and investors are adjusting to an administration that has wasted no time implementing its economic agenda. What began as campaign promises has quickly turned into executive action – particularly on trade – creating a transformed economic environment that investors are still working to fully understand.

Trade Wars and Market Reactions

The April 2nd announcement of comprehensive tariffs caught markets off guard despite months of rhetoric suggesting such moves were coming. The package – 25 per cent on Canadian and Mexican goods, 20 per cent on Chinese imports, and a 10 per cent baseline on nearly all U.S. imports – triggered a swift market correction. Within 48 hours, the S&P 500 plunged 4.8%, erasing US$2.4 trillion in value in a single trading session.

Markets often respond to uncertainty with volatility and adaptation. The tariff announcement itself proved disruptive, but the subsequent policy changes – including the surprise 90-day pause announced just a week later – further complicated investment decisions.

This policy volatility created clear winners and losers. Companies heavily reliant on global supply chains have suffered, with Apple losing over US$250 billion in market value and consumer brands like Nike hitting multi-year lows. Meanwhile, domestic manufacturers with limited international exposure have shown relative strength.

The Cboe Volatility Index – Wall Street’s “fear gauge” – has jumped to levels not seen since 2024’s summer market turmoil, reflecting heightened investor concern about future policy direction.

Bond Markets Signal Inflation Concerns

The bond market is sending strong signals about inflation expectations. Treasury yields have climbed steadily, with the 10-year yield reaching 4.5% by mid-April – a direct response to changing inflation outlook.

Most revealing is the University of Michigan’s consumer survey, which showed expected inflation jumping from 5% to a concerning 6.7% in just one month. This shift affects everything from mortgage rates for homebuyers to borrowing costs for businesses and pressure on household budgets. Some economists warn tariffs could slow growth long term, potentially causing deflationary pressures, adding uncertainty to the inflation outlook.

Dollar Moves Create Global Effects

Currency markets have provided perhaps the clearest window into evolving investor sentiment. After initially strengthening in February to a safe haven, the US dollar (USD) reversed course dramatically by March and April, hitting six-month lows against the Japanese yen and Swiss franc.

For American companies with significant overseas revenue, this currency shift creates a complex equation. When the USD weakens, US exports become more competitive abroad but import costs rise, creating particular challenges when combined with tariffs.

Currency movements affect every day Americans through the price of imported goods, the cost of international travel, and even the competitiveness of American products on world markets – effects that can compound over time and impact consumer purchasing power.

The Australian dollar (AUD) has also faced significant pressure, dropping roughly 5% against the USD in April 2025 as US trade policies and global growth concerns weigh on commodity-driven currencies. Australia’s reliance on exports to China, which faces steep US tariffs, has heightened vulnerability, pushing the AUD to its lowest level since mid-2024. This depreciation raises import costs for Australian consumers and businesses, particularly for US-sourced goods, while offering a competitive edge to Australian exporters.

What This Means for Your Money

Professional investment managers have responded to this environment by reducing equity exposure at the fastest pace in over two years.

The current market conditions have triggered a flight to quality. Defensive sectors like utilities, healthcare, and consumer staples are outperforming growth stocks. Gold has rallied as a hedge against both inflation and policy uncertainty, serving its traditional role as a store of value during uncertain times.

For the average investor, this environment can reward thoughtful diversification rather than reactive trading. Those who panic-sold during April’s volatility missed the subsequent rebounds that followed clarification of policy details.

For Australian investors who hold US denominated investments, the weaker AUD could help offset some of the recent losses in US equities. However, should the AUD move higher from the current levels it could also offset the gains. Investors who feel that the AUD is likely to move higher from here could consider currency hedging options.

Looking Forward: Finding Clarity Amid Uncertainty

As we move beyond these first 100 days, market focus is shifting from policy announcements to implementation details. With national debt exceeding $36 trillion and a divided Congress, the path from presidential priority to economic reality remains unclear.

NAB economics have raised their odds for a US recession, however it is not their base case. This isn’t 2008 or 2020 and the US economy retains significant strengths, including low unemployment and resilient consumer spending – solid foundations that provide stability even as economic conditions change.

What’s likely is that volatility will likely persist as markets adjust to this new economic approach. The most successful investors will be those who can separate temporary market reactions from fundamental shifts, maintaining discipline while positioning for policy directions that show staying power.

In times of economic change, adaptation proves more valuable than overreaction – understanding the new rules rather than wishing for the old ones to return.

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The information contained in this article is believed to be reliable as at April 2025 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, property, financial and taxation advice before acting on any information in this article.

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