Equity markets have been going through some turbulent times of late.

On a global level, the Trump presidency is creating a storm of announcements (often reversing earlier announcements), which creates a lot of uncertainty. Markets don’t like uncertainty.

In geopolitics the main example is around the war in Ukraine and the doubt this creates about the US commitment to security in Europe and therefore global economic stability.

The economic example is around tariffs (“will impose 25% on Mexico and Canada”, “will postpone tariffs on Mexico and Canada”, etc.). Markets are worried about the impact of tariffs on economic growth, inflation, and the related path that interest rates may take.

The same can be said about the potential impact of deportations on the supply and cost of labour, and thus inflation. In light of al this, the S&P500 reached an all-time high in the middle of February, but had lost 10% by the middle of March, putting it in correction territory.

At the same time, and perhaps not unrelated, the Australian stock market has just seen its most volatile reporting season in recent memory. While previously the stock price reaction on result day was on average roughly equal to the EPS revision, this past February saw an average share price movement of 2.5 times the EPS revision.

The number of stocks that moved more than 10%, or 15% on results day was also at a record high.

At AL Capital we managed to navigate this volatility very well, with our Australian Equities fund returning a positive 0.2%, while the market was down 3.8%.

We continue to take advantage of short-term dislocations, as well as longer-term fundamental value opportunities that inevitably present themselves when the market is in a mood of exaggerated reactions to relatively small underlying earnings changes.

Wim Steemers | AL Capital
Head of Research | Portfolio Manager

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