Global markets continue to navigate a cocktail of geopolitical stress, economic ambiguity, and sentiment whiplash. The U.S.–China tariff saga, armed conflicts across various regions, and anxiety around the earnings power of the tech “Magnificent Seven” are feeding an environment dominated more by volatility than clarity.
Yet amid this fog, investors should not overlook one essential truth: markets often rebound before the headlines do.
Earlier this month, global equities staged a sharp rally on the back of renewed trade negotiation hopes. As Reuters noted:
“The week started with a bang but by Friday the risk-on rally – supercharged by a China-U.S. trade truce – was wearing thin as traders grew wary that the rebound had overshot and that more twists and turns lie ahead in the trade saga.” — Reuters, May 16, 2025
And importantly:
“The stock market now seems to be acting as if the tariff war never happened… Even Chinese blue chips have recovered all of the losses since April 2 when President Donald Trump announced ‘reciprocal’ tariffs – since put on hold – on the rest of the world.” — Reuters
Staying Invested Pays Off
At Index Solutions, we do not attempt to chase returns during these periods. Instead, we increase diversification and focus on robust portfolio construction using globally diversified, low-cost ETFs. As shown below, most major equity exposures in our Balanced portfolio (IDXCOMBALA) have outperformed the STXTRA 3-month money market ETF over the last year.
With the exception of Indian equity (STXNDA), all equity exposures have recovered above the performance of ultra-safe cash equivalents. Notably, the sharp rebound of April 2025 highlights how investors spooked by the earlier drawdown would have sorely lost out had they exited the market.
Our Message to Investors
Market drawdowns are scary. But their recoveries are often sudden, sharp, and easy to miss. The opportunity cost of disinvesting at the wrong moment can be permanent.
Our philosophy is simple: stay invested, stay diversified, and stay focused on the long term. While the exact resolution to today’s trade tensions is unknown, pressure is mounting globally to resolve these issues. When that happens—and it will—markets will reprice swiftly.
Index Solutions is a licensed FSP (44691). Visit www.indexsolutions.co.za for more insights or contact your financial advisor.
