Equity Opportunities as We Navigate the New World Order

April 2025 | By Alex Tedder Global Macro Analysis Equity Volatility

Uncertainty around tariffs and shifting trade emphasizes the need to consider looking for companies with strong competitive positions.

What You Need To Know

The immediate expected impact of higher tariffs is higher costs and inflation, reduced economic activity and growth, decreased company profitability, and weaker consumer and business confidence for both the US and the global economy.
The ever-shifting policies around tariffs and trade may continue to cause volatility, but may also present opportunities.
We believe the focus should be on quality companies with a strong competitive position that should drive pricing power.

The tariffs announced on April 2 would have represented a step-change in US trade policies, and as such, caused the S&P 500 Index¹ to experience one of its sharpest short-term declines in decades as investors feared a global recession. The subsequent pause in tariffs was a source of relief, but uncertainty still remains.

The fluid nature of the situation calls for caution before taking immediate action, but we acknowledge that market volatility may present opportunities, similar to what we experienced during the COVID-19 pandemic. Importantly, the market moves year-to-date, which intensified in early April, are driving significant dislocations in areas that we believe remain structurally attractive on a multi-year view.

Quality companies that think long-term ought to be better able to navigate these tariffs.

Global Macro Analysis

Stay Calm, Stick to Your Plans, and Be Open to Opportunities

Falling markets are not new, but using a data-driven mindset can help ease the sense of panic that often grips investors.

Consider Focusing on Structural Winners and Companies With Strong Competitive Positions
Generally speaking, AI-exposed stocks and high-momentum stocks have come under selling pressure year-to-date as investors have rotated out of areas with higher valuations. Alphabet, Meta, Netflix, and Broadcom, to take a few examples, saw their share prices fall despite strong fundamentals and earnings. In each case, the companies benefit from secular growth trends and a strong competitive position, which we believe could help drive share price outperformance longer term.

Similarly, quality companies that think about long-term planning, supply-chain resilience and diversification, and customer relationships ought to be better able to navigate these tariffs and consequential changes in the competitive landscape. These types of companies can typically see selling pressure initially at times of heightened uncertainty and market risk, but could potentially offer greater risk-adjusted returns as trade dynamics adjust and markets normalize.

For sectors in the crosshairs of the trade policy, we believe the focus should be on companies with a strong competitive position that should drive pricing power, longer order back-logs as uncertainty impacts capital expenditure decisions, and greater domestic exposure.

Clearly, industries less affected by trade disputes, such as banks, healthcare, and utilities, may provide some respite from tariff-driven uncertainty. Areas that offer defensive growth attributes may also fare better since their relative earnings stability delivers resilience at times of increased economic risk and uncertainty.

Global Macro Analysis

Stay Calm, Stick to Your Plans, and Be Open to Opportunities

Falling markets are not new, but using a data-driven mindset can help ease the sense of panic that often grips investors.

Major Disruption and Readjustment to Existing Regime

It was increasingly clear over the past several weeks that tariffs are not only intended as a tactic for negotiation, but also viewed as a tool to:

Protect and reinvigorate US industry
Generate revenue

While the White House has indicated that the reciprocal tariffs could be negotiated down, this still represents a major disruption and readjustment to the existing trade regime.

It’s a fluid situation with additional developments expected in the days and weeks ahead as global leaders determine their own course of action and the negotiations intensify. We also need to consider the potential for a reaction from the monetary authorities and the potential for interest-rate cuts. Market volatility is, therefore, likely to persist near term.

Implications for US Stock Market Exceptionalism and Non-US Equities

Our outlook remains under constant review given the potential for US trade policies to undermine global growth and negatively impact business confidence and consumer sentiment.

The current US administration is seemingly willing to tolerate significant short-term economic pain in its ambition to reshape perceived global-trade imbalances. The immediate impact of higher tariffs is expected to increase costs and inflation, reduce economic activity and growth, decrease company profitability, and harm consumer and business confidence for both the US and the global economy.

The US consumer, however, is likely to bear the brunt of price increases.

A buoyant consumer has been a key pillar of US stock-market exceptionalism over the past couple of years. The US consumer, however, is likely to bear the brunt of price increases.

We’ve already seen signs of consumer weakness and frailty, particularly among the lower-income cohort. So their ability to absorb price increases is diminishing and consumer companies are likely to see their profitability impacted.

It’s still unclear the extent of retaliatory tariffs, but higher savings rates, as well as looser fiscal and monetary policy in other regions, may provide some relative resilience, particularly in Europe.

Given that the US relies on foreign nations to fund its twin budget deficits, this unconventional economic policy is likely to test investor confidence in US stability. The US dollar has continued to weaken this year from elevated levels, reaching a six-month low on the back of the tariff announcement mixed with waning confidence in the growth outlook. This may support continued flows toward non-US equities.

Respite for the US economy—and indeed market sentiment—could come in the form of more consumer- and business-friendly policies via the tax-reform and deregulation platform for the Trump administration. Any positive impact on US growth, however, is unlikely to fully offset the potential negative effect of tariffs.

The short-term and long-term effects of these measures are uncertain, and markets dislike unpredictability. We’re already seeing downgrades to global-growth estimates as companies delay capital-investment plans and consumer spending slows in light of increased uncertainty and adverse near-term implications of Trump’s proposals.

Talk to your financial professional to better understand the impact of shifting policies on your portfolio.

¹ S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.

Important Risks: Investing involves risk, including the possible loss of principal. ● Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political and economic developments. ● Focusing on one or more sectors may subject investors to increased volatility and risk of loss if adverse developments occur. ● Diversification does not ensure a profit or protect against a loss in declining market.

The views expressed herein are those of Schroders Investment Management (Schroders), are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. The views expressed may not reflect the opinions of Hartford Funds or any other subadviser to our funds. The views and information discussed should not be construed as research, a recommendation, or investment advice, nor should they be considered an offer or solicitation to buy or sell any security. This information is current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Schroders or Hartford Funds.

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From our sub-adviser Schroders Investment Management

Alex Tedder

CIO Equities