After reaching record highs in mid-February, global share markets have recently experienced a pullback. This has been driven by a mix of economic uncertainty, shifts in monetary policy, and geopolitical developments. While market volatility can be unsettling, history suggests that markets tend to recover and find new ways to grow over time.

Understanding the Market Pullback

Looking at recent trends, there are a few key factors behind the current market weakness:

• Economic Indicators Falling Short: The US services sector contracted for the first time in over two years, indicating slowing economic momentum.
• Shifting Consumer Behaviour: Anticipation of increased US tariffs led businesses and households to bring forward spending, leading to weaker demand in early 2025.
• Reduced Rate Cut Expectations: Market participants have adjusted their outlook, now expecting fewer interest rate cuts this year.

Despite these factors, it’s important to note that markets have endured many challenges in the past and have consistently rebounded over the long term.

Reasons for Optimism

While market weakness can be concerning, there are several positive developments that should not be overlooked:

• Resilient Labour Markets: Strong employment levels and job security help mitigate the risk of a deep recession.
• Broader Market Participation: Unlike previous years where gains were concentrated in a few stocks, more sectors and regions are now contributing to market performance.
• Technological Advancements: Innovations in artificial intelligence and healthcare are creating long-term investment opportunities.
• Global Growth Opportunities: Europe’s increased fiscal spending, Japan’s economic resurgence, and opportunities in emerging markets such as India provide new avenues for growth.
• Australia’s Economic Outlook: The domestic economy has emerged from a two-year per capita recession, and the Reserve Bank of Australia has begun easing monetary policy, providing a supportive environment for growth.

Staying the Course

Market fluctuations are a natural part of investing, and history shows that markets have always found ways to recover. While short-term volatility can be challenging, staying focused on long-term investment goals and maintaining a well-diversified portfolio remain key strategies for navigating uncertain times.

Patience and discipline are critical, and market downturns often present opportunities for investors who remain focused on high-quality investments.

Navigate these changes with SCM 

If you have any concerns about your portfolio or investment strategy, please don’t hesitate to reach out to your advisor.

SCM Financial Group Investment Committee