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Transcript: Weekly Wrap March 28
Trump Tariffs are the revolving theme driving market sentiment over the last month and the rollercoaster of trump tariffs took off yet again this week as the president announced further taxes and pardons ahead of the April 2 ‘reciprocal tariff’ deadline.
Let’s break down the tariffs announced so far, what is expected on April 2 and how will these tariffs impact you as an investor.
Yesterday, Trump announced a 25% tariff on all cars and parts that are not built or produced in the US. While this looks positive in terms of favouring US brands in the market for sales in the US, it actually hurts not only US automakers but the end consumer too. Almost all automakers in the US current source parts and elements of their respective supply chains overseas, which will mean the new tariff impacts these automakers too as they will be taxed for any parts made overseas. The intention of Trump’s tariff on non-US made cars is to prompt automakers to move car factories back to the US.
Unfortunately for consumers though, any company in the US or overseas that is selling a car in the US market will be tariffed the 25% and as such, we will see the prices of cars increased as the companies impacted pass on the tariffs to the end user as opposed to wearing it themselves. Global automaker stocks fell after the tariff news was announced.
Copper prices hit a fresh record high of US$5.374/pound on Wednesday amid investor concerns over Trump’s intentions to impose a tariff on copper imports in the coming weeks. Copper prices have soared 31% this year, driven primarily by US buyers trying to stockpile the commodity before potential tariff impositions. Copper prices have outperformed the gold run and stock market returns YTD with a rise of 30% since the year started. The rise of copper demand has been driven by its key role in the green energy transition, and current outlook for undersupply of high-grade copper for years to come.
Since tariff threats began on copper, exports of copper scrap have declined from the US, and copper scrap accounts for around a third of global copper production. The reasons behind Trump’s copper tariff include China being the world’s largest importer of the critical mineral, embarking on a stimulus and recovery journey which will increase the region’s demand for copper, low supplies increasing global demand for the commodity, of which the US is the 5th largest producer of copper and holds 8-10% of the world’s unmined copper reserves, and the growing and increasingly diversified use of copper in AI, tech and many other industries. With the electrification movement ramping up, we expect Trump’s copper tariff to be announced over the coming weeks… watch this space.
And of course, the April 2 deadline looms for Trump’s reciprocal tariff threats. April 2, according to the US president, is known as ‘Liberation Day’ whereby taxes on imports of goods into the US from countries that the US either consistently has a trade deficit with, or, those that have tariffs on US goods, are in the firing line for new tariffs to be implemented on goods from such countries coming into the US. However, in recent days, President Trump has said April 2 may see more lenience than reciprocation, but with the volatility of this guy, who knows what will come on April 2, again, it is a watch and wait situation.
US consumer and business confidence has taken a battering amid the tariff and market volatility with so much unknown and inability to forecast, hire, spend or even predict what is going to unfold over the coming months.
So, what does the this leave you and your investment decisions? Any exposure to US equities in the automaking space will likely face volatility over the coming weeks as markets react to the new auto tariff. Exposure to copper miners locally or in the US may have varying movements but copper is a commodity in high demand thus driving tailwinds for the sector. Gold has been on a run as investors flock to the safe-haven nature of the precious commodity. And finally, keep calm and remember to follow your investment strategy. Reactive selling, news and noise all cause stress in the market and over a 10-year period, we have seen that when markets tumble due to events like COVID or the GFC, they also rebound and rise higher over the following years.
Locally from Monday to Thursday the ASX200 posted a 0.48% gain as a strong rally among the big banks offset broad weakness among tech, real estate, healthcare, staples and materials stocks.
The winning stocks this week were led by Gold Road Resources (ASX:GOR) soaring 23% on a received and rejected takeover offer, while Mineral Resources (ASX:MIN) jumped 8.8% and Healius (ASX:HLS) gained 8.61%.
On the losing end Helia Group (ASX:HLI) fell 18.56% while Clarity Pharmaceuticals (ASX:CU6) tumbled 18.35%.
On the broader market index, the All Ords, rose 0.33% this week as AMA Group (ASX:AMA) rocketed 25% while FBR (ASX:FBR) tanked 41.18%.
The most traded stocks by Bell Direct clients this week Macquarie (ASX:MQG) and Larvotto Resources (ASX:LRV). Clients also bought into James Hardie Industries (ASX:JHX), NAB (ASX:NAB), Westpac (ASX:WBC), ANZ (ASX:ANZ), and Woolworths (ASX:WOW) while taking profits from Mineral Resources (ASX:MIN), CBA (ASX:CBA) and BHP (ASX:BHP).
And the most traded ETFs by clients this week were led by Vanguard Australian Shares Index ETF, Vanguard US Total Market Shares Index AUD ETF and iShares S&P 500 AUD ETF.
On the economic calendar front next week we may see investors react to the RBA’s latest interest rate decision where it is widely expected Australia’s central bank will maintain the current cash rate at 4.10% to ensure inflationary drivers remain under control and also due to uncertainty over global growth due to Trump’s tariffs.
Overseas, we may see investors react to China’s Manufacturing PMI out on Monday with the forecast of a slight uptick in output, and US jobs data out later in the week where it is expected the unemployment rate will remain steady but less jobs are anticipated to have been added to the US economy in March.
And that’s all for this Friday, have a wonderful weekend and happy investing!
