Every year the various dictionaries including the Oxford, and the Merriam Webster choose their annual “word of the year.” It’s a light-hearted exercise but underlying the PR value is a serious search for the words that most reflect our ever-changing zeitgeist.
So far, and we’re only up to May, our money is on one word that has been thrust upon us: Tariffs.
It is derived from an Arabic term ta’rif that first entered the European lexicon in the 1590s. Those busy-trading Venetians adopted the term to describe the practice of keeping a list of imports (think silks and food delicacies) and taxing these at a fixed rate. It may be old but here in 2025 it pops up in every conversation and has provided endless fodder for the late-night US-based commentators, Stephen Colbert, Jimmy Kimmel and John Oliver.
In New Zealand we can be a little more sanguine purely on the basis that we don’t operate in such fraught and risky sectors as automotive, oil or micro-chip manufacture; three sectors where the USA and China are competing head-to-head and where tariffs are being used as the primary weapon to extract concessions in these markets.
We even see some good coming out of the present mess. There appears to be a willingness by Canada and Europe to forge a free trade agreement, and this sentiment appears to be spreading to other regions including Asia. These moves could have a cushioning effect if the trade conflicts continue. This is not a global trade war; it is to a great extent an American trade war.
Wrote one long-standing client:
“Many thanks for the past twenty some years. I am 100% sure that you are looking after my investment well with your professional plans. I do understand that the global stock market is shaken by the US custom tax game, but I know that you will be the right person to handle this Slippy situation, besides, I noticed that my investment is set with bonds as well as long term deposits, so I believe that I am in a very safe position.”
Our clients’ comments reflect the fact that we have been through the Global Financial Crisis, the Covid pandemic and various recessions.
- “I can assure you during our 80 years of life we have lived through many ups and downs and this time we are very pleased our money is in your capable hands.”
- “I feel I am in safe hands, or as much as can be expected in these turbulent times.”
- “Thank you for your email which explains the alarming situation very well.”
- “At the moment I have no need to sell any shares, so I will definitely sit tight!”
For the benefit of the wider readership of this newsletter, we share our message emailed to clients at a time where the world has become topsy turvy.
The US tariff policies are having an alarming impact globally, and no one knows how things will play out. What we do know, however, is that it’s normal for uncertainty to make the sharemarket more volatile.
As headlines scream out how much share markets are down, they add to the fear and anxiety that we feel as we grapple to see how it all affects our lives personally.
Share prices get driven lower as selling is motivated by emotion. Your portfolio has a mix of investments, not just shares, which means you are anchored in calmer waters.
Regular drawings or any extras continue to be met by the stable parts of your portfolio. We want to reassure you that what matters at present is staying the course and unless your plans or needs have changed, our advice is to sit tight.
Calming Strategies
- Take comfort that your portfolio has cash, term deposits and bonds, which are the defensive elements. They form a stable part of the portfolio.
- Infrastructure funds add to the income cashflow of your portfolio. A portion of the funds investing in overseas shares will benefit from currency gains while the NZ dollar is low.
- A piece of sanity advice: do not look at your portfolio frequently. Values will move around.
- Talk to your adviser if you have near-term commitments that require setting aside some cash.
- Apply a little skepticism when reading the headlines. To date we have seen several reversals and changing narratives.
- Know that much of the sell-off in the S&P 500 and NASDAQ maybe caused by emotion and herd mentality. The final effect on companies remains unknown.
