Trump and the markets

As April 2025 comes to an end the world’s biggest economy and Trump continue to dominate the news.  The US monthly job report together with earnings reports expected this week from Amazon, Apple, Meta Platforms and Microsoft will confirm how much trade turmoil has affected the US economy, particularly Apple’s reliance on its Chinese supply chain.  Through all of this, with tariff talk all around us and a changing landscape, one thing is for sure … the markets do not like sudden moves or uncertainty, and despite initially rallying after Trump won the US election, we now have ‘Tariff gate’, with the resulting downturn of the S&P 500 in Trumps first 100 days clearly seen in the chart below.

For investors, Trumps impact on the markets can be a worrying time, but it’s best to avoid ‘micro managing’ your portfolio.  What I’m talking about is checking your portfolio daily or weekly, as it’s just too short a time period to gain any in depth understanding of what’s going on with values, and the movements can make you feel uneasy.

Please take a glance at the following two charts.  The first is the S&P 500 (the US) over the last 6 months, and the second is the S&P 500 since November 1996.  On the longer term chart, you can easily see the impact of Covid 19, and the recovery that followed, but if you focus only on the first chart (which doesn’t cover just a day or a week for those prone to micro managing) it covers a six month period, it looks rather gloomier than the longer term trend demonstrates.

Have an honest and realistic discussion with your Adviser about expectations

The easiest thing in the world is to tell people what they want to hear.  However, my job is to gain a good understanding of what our clients want to achieve, within the level of volatility they are willing to accept.  There is no magic wand, it’s always about finding the right balance between the two.  Remember, if anyone promises guaranteed high returns with little or no risk, be on your guard … if it looks too good to be true, it usually is! 

Lets talk more about risk

This is a big subject, not to be underestimated.  Risk could be anything from visiting a casino, buying crypto or just taking the next step and moving your savings from the bank/building society.  Risk can be referred to as the chance of losing everything, or the chance of your investment dipping through the normal ebs and flows of the markets … known as volatility (how much an investment might go up or down). 

With sufficient diversification, using well established underlying investment funds, being mindful of changes to market conditions, and taking a long term view (five years or more) a discussion around risk becomes more about the ups and downs along the way.  If you choose to stay in calm waters (what I call ‘steady Eddies’) there isn’t likely to be a lot of downward movement on your investment, but there isn’t likely to be a lot of upward movement either!  If you choose choppier water, the dips will be deeper, but riding that wave also offers the possibility of higher longer term rewards!  We find that our clients like a mix of the two, the ‘steady Eddies’ provide stability within a portfolio, with the inclusion of some tactical equity exposure to provide the potential for outperformance over the longer term.

What can you expect from different options

Lets look at some numbers.  If you are looking for a regular income, the chart below demonstrates how much you would have been able to take without eroding your capital over different periods of time with different levels of equity content.  It demonstrates the difference between staying in those calm waters, with a lower equity content of up to 35% (the first line), moving up a notch to slightly more adventurous investments with an equity content of up to 60% (the second line) and into the ‘choppier water’ of a higher equity content of up to 85% (the third line).

Source: Prudential & FE Antalytic

Here is the same information in monetary terms … the monthly income available with different levels of equity content historically, without draining capital.  The higher the equity content, the higher the monthly income available has been over each period.

Source: Prudential & FE Antalytic

If you want stability within your portfolio, without losing out on the potential gains from including equities, diversification is key.  This will ensure that each underlying asset within your portfolio is contributing something different.  For those needing income, long term studies have shown that taking up to 4% pa income from investments and pensions is a reasonable amount, designed to provide an income for life that is less likely to impact on your capital over the longer term.  This is an important point to take into consideration when thinking about your income requirements for retirement, and as you can see from the charts, is impacted by your chosen equity content and the period in which you are invested. 

So think about your longer term goals and try not to focus on short term dips caused by systematic risk.

 To explain, there are two ‘bands’ of risk … systematic and non-systematic.  Systematic risk involves geographical, health or political situations that we can’t ‘manage away’ on your behalf.  Situations like Covid, the Ukraine/Russia situation, and now Trump Tariff gate!  It doesn’t matter how well diversified you are, when the whole market has a wobble, your portfolio will be affected. 

It’s the other band that your chosen financial adviser can have an impact on … the non-systematic risk band, and that’s where diversification matters.  As a qualified investment and risk specialist,  at Speed Financial Solutions we use diversification to manage risk.  Our portfolios are rebalanced as necessary based on fundamentals, not headlines. Every underlying investment fund has been individually assessed and analysed for its appropriateness to include in our client portfolios, and an investment fund is only included if it meets our very strict criteria.  That’s why I can confidently say to our clients, sit tight and ride the Trump Tariff gate wave!

If you would like to discuss your own portfolio, please do call us, we’re always happy to have a chat.

 Summary

Our aim is to ensure that you are able to enjoy life while we take care of your finances, ensuring you’re set up in the most tax efficient way for your particular circumstances.  If you are thinking about how best to set up your finances please do contact us, or book a free 30 minute consultation via our website.

Speed Financial Solutions are a highly qualified and regulated financial services provider looking after clients throughout Spain and the UK.  Established in 2010, we provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your financial planning.

Our Principal, Andrea Speed, is a qualified Discretionary Investment Manager specialising in Investment and Risk, Taxation and Trusts,  and a qualified Pension Specialist.  Andrea is also a Fellow of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world. 

Fellowship is the highest qualification awarded by the CII (Level 7) and is universally regarded as the premier qualification.  It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.  Along with a Fellowship, Andrea is a CII Chartered Financial Planner.

Please take a look at our website – www.speedfinancialsolutions.com

For further information contact us on Tel 951 315 271 or 951 318 529

admin@speedfinancialsolutions.com

We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation.  Follow us on Facebook for regular updates.

This communication is for information purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Andrea J Speed FPFS (DM), M.A.

Principal, Fellow and Chartered Financial Planner

Speed Financial Solutions

29 April 2025