Markets have entered ‘the end of the beginning’ after weeks of trade tariff volatility, but face far more consequential movements in the months ahead, according to fund managers at Ruffer.

Ruffer Investment Company and the group’s other equity funds have since last year been positioning for a potential shift in sentiment away from the richly-valued US market in favour of other global rivals.

But President Donald Trump’s trade war has accelerated the trend amid upheaval in global asset markets, the scale of which has even prompted some analysts to question the future of US dollar supremacy and dominance of US markets.

The US dollar has regained some ground from recent lows but has still lost around 9.5 per cent against the euro since January highs that saw the currencies trade at near parity.

Treasuries – US government bonds – remain largely out of favour while US stock markets have seen much sharper losses than most rival markets.

Jasmine Yeo, fund manager at Ruffer, said: ‘Over the last couple of years, we’ve been concerned by the high valuations, and low risk reward on offer in US equities and credit markets.

‘Investors have been very fully positioned in those asset classes, where there a lot of leverage.

‘And there’s limited US policy space in terms of the fiscal deficit and where inflation is. Our core view post US election was that US exceptionalism was unlikely to be sustained under this new US administration.’

Ruffer fund manager Jasmine Yeo 

The S&P 500 and Dow Jones are down by around 5.5 per cent each since the start of the year, whole the tech-focused Nasdaq has lost almost 10 per cent.

By contrast, the FTSE 100 has recovered ground to trade 2.2 per cent higher year-to-date, while European stocks are up by a similar amount.

Hong Kong’s Hang Seng has enjoyed double-digit gains in 2025, but the world’s other major equity markets – Shanghai and Tokyo – trade sharply lower.

Savers may have noticed an outsized impact on the value of their pension and investment portfolios owing to high exposure to the US market, which represents roughly 72 per cent of the MSCI World index and nearly 43 per cent of the FTSE World Government Bond Index.

Fund managers measure their performance and exposure relative to indices like these. A global fund that is ‘underweight’ the US is likely to still have significant exposure to the market.

Yeo said: ‘What was quite a benign rotation has become a little more challenging for markets as investors start to reappraise whether their allocation, or positioning for US exceptionalism and US dominance, remains relevant or appropriate.

‘We’ve had the end of the beginning. It’s hard to see how in the next few weeks, the news flow can get even more negative, or even more surprising. I think that’s why you’ve started to see a bit of a bounce in in equity markets.’

However, Ruffer remains in ‘defensive’ mode, bolstering its exposure to cash and cash-like instruments like short-dated bonds, despite seeing the potential for a resurgence in US inflation.

UK stocks are the largest equity component of Ruffer IC’s portfolio. 

Yeo said: ‘We think cash is an attractive place to be at this particular moment in time.

‘At some point the policy uncertainty, the impact of tariffs and the planned cuts to fiscal spending are going to impact growth.

‘The question for investors is ‘how long can this period of reprieve last, and how bad is the growth impact potentially going to be on the other side?’.

‘If you’ve got tax cuts on the horizon, as well as the impact of tariffs and the curbing of immigration, these things can very easily restoke inflation.

Ruffer IC has boosted its exposure to cash and cash-like instruments 

‘We expect to continue being positioned [defensively] because it’s quite likely that you’re going to get much more volatility, because the US administration is going to continue to be a destabilising force for markets.

‘When that growth shock comes, asset prices probably have further to fall.’

Shares in Ruffer IC, which aims to achieve a positive total annual return of at least twice the Bank of England base rate, were up 4.8 per cent since the start of the year at the end of March, with a NAV total return of 4.7 per cent over the last 12 months.

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