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The last week of April 2025 saw buoyant stock markets, with major indexes rebounding 5-10% after a volatile month that saw many markets briefly enter correction territory. While April ended roughly flat after the late recovery, the dramatic intra-month swings highlight the uncertainty facing investors as trade tensions between the U.S. and China remain elevated. When markets move by that much in a few days the lines between strategic, dynamic and tactical thinking getting blurred and arguably the events of the last month could be epoch defining in hindsight. So perhaps now more than ever we find our self triangulating between implied long-term risk premiums, short-term market moves and medium-term thematics. Maybe that's what regime change looks like up close?

As President Trump continues to take a hard-line stance on tariffs in pursuit of better trade terms, markets are grappling with two potential scenarios: 1) This is a long-term ideological shift toward protectionism that could depress global economic growth, or 2) It's a shorter-term negotiating tactic and markets will rally once a trade deal is reached in the next 90 days.

For long-term strategic investors, it's critical to look past the day-to-day headlines and tweets and focus on enduring economic drivers and market fundamentals. While geopolitical shocks can certainly rattle markets in the short-run, corporate earnings, productivity, valuations and structural economic forces ultimately matter more for returns over a multi-year horizon.

That said, astute investors should contemplate whether U.S.-China trade frictions could spark a more fundamental regime change for the global economy and markets. The U.S. has been the world's most productive economy and profitable market, so any durable hit to its trade relationships could disproportionately impact its growth and earnings, while the rest of the world that is less reliant on the U.S. fares relatively better. Developed markets like Japan and Europe could be "pigs in the middle" that gain share in a more multipolar world as the U.S. and China both face challenges.

However, investors must also weigh the risk that an extended period of trade tensions and uncertainty could tip the highly synchronized global economy into a worldwide recession. The probability of that adverse scenario rises the longer these trade disputes drag on without resolution.

On balance, a globally diversified long-term investor should stay focused on valuations and earnings power, which still matter more than trade headlines. After the April correction, U.S. valuations were starting to look more compelling again on a relative basis but after a 10% rally we are back where we were at the start of the month. However, we are starting to see signs that the valuation-based view of ex-U.S. markets could coincide with a world of diminished U.S. economic dominance leading to a situation where the fundamentals and thematic coincide.

In the end, all the tariff Tweet-watching in the world is no substitute for a disciplined, long-term investment approach. By keeping a steady eye on the horizon and judiciously shifting exposures based on evolving fundamentals, not just reacting to protectionist rhetoric, we think we can start to take advantage of all the noise in a long-term, thoughtful manner. In that sense all this political and geopolitical uncertainty might ironically be making portfolio choices easier to live with.