Just as investors began adjusting to a stabilising outlook, 'Liberation Day' in the U.S. has reshuffled the global economic deck.

As global economic conditions continue to shift, MGD Wealth Director and Investment Committee Chair Stephen Furness sat down with Jack Sutherland, Head of Investment Strategy (Australia) at WTW, to unpack the latest macro trends and their implications for portfolio strategy.

Their conversation coincided with the Trump administration’s announcement of sweeping new tariffs aimed at recalibrating U.S. trade policy — adding fresh complexity to an already dynamic outlook. From diverging economic performance across regions to inflation pressures and Australia’s interest rate path, their discussion offers timely insights for investors navigating an uncertain landscape.

Key Takeaways

US tariffs may raise inflation and dampen growth: New tariffs are expected to increase inflation and reduce US growth forecasts.

Global divergence persists: Japan and parts of Europe are showing resilience, while the US faces headwinds and China remains policy-reliant.

Outlook for Australia is cautiously optimistic: Easing inflation and potential rate cuts support a moderate recovery.

Interest rate cuts likely in Australia: Labour market softening supports the case for further RBA rate reductions in 2025.

Strategic portfolio positioning remains key: Diversification and long-term thinking remain central to navigating short-term volatility.

US Growth Outlook Shaken by New Tariffs

The US economy began 2025 on solid footing, buoyed by favourable fiscal policy expectations around tax cuts and deregulation. However, recent tariff announcements under the Trump administration—dubbed "Liberation Day"—have changed the tone.

“These new tariffs are likely to be inflationary,” said Jack Sutherland. “They’ll push inflation higher than we previously forecast, and also temper the pace of US growth.”

While these measures present downside risks, they may ultimately be used as a negotiation tool rather than permanent policy, with the potential for a more moderate outcome. “If negotiations result in reduced tariff levels, that could actually support equity markets,” Sutherland added.

Global Growth Divergence: Europe, Japan, and China

Despite short-term turbulence, several macroeconomic themes remain intact:

Japan continues to show structural economic improvement, with supportive equity market dynamics and a gradual shift away from ultra-loose monetary policy.

Europe, notably Germany, surprised to the upside thanks to post-election fiscal stimulus, though overall growth remains fragile.

China’s performance hinges on sustained policy intervention. While its 2024 performance underwhelmed, aggressive policy moves may stabilise growth in 2025. However, geopolitical tensions and trade uncertainty remain key risks.

Australia: Room for Rate Cuts

Back home, Australia’s economic environment is soft but improving. The Reserve Bank of Australia held the cash rate at 4.1% in its April meeting, citing easing inflation and a cooling labour market.

“Employment is falling slightly, and participation is down. These are leading indicators of a weakening labour market,” said Sutherland. “That gives the RBA room to cut rates at least a couple of times this year.”

Still, global inflationary pressures—especially from US trade policy—remain on the radar. The RBA will likely proceed cautiously, balancing domestic disinflation against potential external shocks.

Strategic Implications for Portfolios

While short-term developments like tariffs and elections attract headlines, Sutherland reiterated the importance of long-term thinking in portfolio construction.

“Long-term views remain the most important driver of outcomes,” he said. “We adjust our positioning when appropriate, but fundamentally we’re aiming for incremental improvements on top of a well-diversified base.”

At MGD Wealth, this philosophy translates into portfolios built around matching cashflows to timeframes, minimising sequencing risk, and maintaining resilience amid volatility.

Final Thoughts

With global conditions shifting rapidly, the message is clear: stay invested, stay diversified, and remain focused on the long term. While 2025 may present new challenges, it also offers opportunities for investors who can navigate complexity with discipline and insight.

For any questions or to discuss your portfolio, reach out to your MGD Wealth advisory team.

Important Note: Any advice included in this video and article is general and has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider its appropriateness having regard to these factors before acting on it. Before you make any decision about whether to acquire a certain financial product, you should obtain and read the relevant product disclosure statement.