Gower Corporate Pension Schemes Member Briefing - June 2025

2025 heralds yet another new normal

 

Adam Sullivan, Senior Financial Adviser, reflects on a rollercoaster six months for financial markets, from the highs of January & February, through the Trump imposed tariff downturn, to partial recovery.  There is certainly plenty to reflect on for pension savers, as they continue to build retirement savings.    

As stock market panics rank, April’s Tariff announcements certainly focused world attention. The degree of market volatility witnessed was huge and the breath of asset classes effected was global.

The ‘Vix’ or volatility index is a popular indicator of general market uncertainty and is often referred to as the ‘fear index’. Stock markets were indeed fearful as the magnitude of recent events prompted this measure to revisit levels not seen since the Great Financial Crisis (2008), or more recently, the Global Pandemic (2020). These comparisons serve to illustrate the genuine panic that ripped through markets.     

Anyone thinking they knew ‘what next’ for the complexities impacting our economic and market futures, prompted comparison to Richard Feynman’s take on Quantum Mechanics. ‘If you think you understand Quantum Mechanics, you don’t’…

There were many moving parts to what currently appears to be a short-lived sell-off, and whilst they appear to have little correlation there is causation within recent developments. Certain elements of the stock market carried valuations that were arguably becoming hard to justify. Market exuberance and the so called ‘Trump bump’ at the beginning of 2025 only adding to already richly-priced valuations.

A degree of market re-assessment was inevitable at some point. Global economies were finely balanced before President Trump’s aggressive tariff announcements on the 2^nd of April. Recession had already been frequently touted and international conflicts appeared only to multiply. While energy transition and climate-linked challenges abound – including black-outs in Europe - as equity market difficulties go, the current in-tray takes some beating.  

The US version of ‘liberation day’ maybe acted as a key existential trigger-event for that re-assessment of many a global risk. Not forgetting of course, the apex challenge that US Reciprocal Tariffs now pose to global trade and economic growth, ergo the market sell-off.

Buying opportunity? Who could have foretold that record market falls equally saw record market gains. No retail pension investor can navigate such volatile waters safely. It is best therefore to not do so and resist the fear/greed or FOMO that can typically accompany such periods.

Given these developments, a number of clients over recent months have cited gold as an asset to consider at times of equity market weakness. There is no question that significant exposure to this asset class would have proved highly rewarding through recent periods.

Such strategies need to account for both Russia and China’s part in gold’s ascent over recent years and the danger inherent of a sharp fall. ‘De-dollarisation’, is equally referenced as another factor behind gold’s rise as countries manage foreign currency reserves away from the Dollar and the former safe-haven US bond market that is now faltering.

Against this backdrop and far more, it has unsurprisingly proved a tough quarter for Member Scheme Pension investment funds with models barely matching sector averages. That said, all medium-term performance measures importantly exceed sector averages, illustrative of the spread and quality of the underlying investment arrangements.

Stark comparisons are useful as there is no ‘sugar coating’ the degree of market uncertainty we have recently moved through. Such periods can prove highly rewarding for regular pension savers but offer little comfort to those at or close to retirement.     

Regular review and discussion is always available from the team at Gower. This may simply be to talk through the various issues currently impacting planning or to ensure planning is where it needs to be. It may involve a pension forecasting exercise in ‘stress testing’ any given pension income scenario, which can prove a highly informative exercise and give comfort through a highly challenging period.  See www.gower.gg/future-forecast for further details. 

I close in wishing all Scheme Members an enjoyable summer ahead.

Adam Sullivan

Senior Financial Adviser