Last week, I wrote about why I thought the looming ‘Liberation Day’ announcement would impact UK investors. Even though the news would relate to America and tariffs on countries around the world, I felt that UK stocks could be significantly impacted.
Given the major move lower in the FTSE 100 since then, it’s clear this has played out. So here’s what I think happens now.
Nothing positive right now
The FTSE 100’s down 11% in the past week. There’s good reason for this, as many of the companies in the index are huge multi-national businesses that trade around the world. Therefore, many are impacted by the tariffs. In AJ Bell analysis of Bloomberg data, Ashtead Group is one of the hardest hit, with 92% of sales in the US and 90% of facilities located there. Yet there are 20 companies in the index with more than 20% of their facilities in the US.
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I see the market continuing to fall in the short term unless we get some meaningful walkback on the tariffs or some supportive action. In terms of UK-specific actions, this could include the central bank governor coming out and pledging support or a trade deal struck that sees the tariff removed. At a global level, a change in President Trump’s rhetoric would certainly help to provide some optimism to investors.
Yet, without any of this, and just further retaliatory tariffs being imposed by the other nations, I struggle to see a reason why stocks won’t keep falling in the coming weeks. Of course, I’m not suggesting markets keep losing at the same pace as the past few days. The volatility and pace of selling should slow somewhat. When the dust settles, that’s when I’m planning on going bargain hunting.
Building my list
One stock on my watchlist for the coming weeks is Rightmove (LSE:RMV). The online property portal has experienced an 8% drop in the past week. It’s still up 17% over the past year.
The sharp fall in the past week is partly justified. The economic uncertainty created by the tariff announcement could mean that some people don’t feel comfortable looking to buy a property. As a result, this could diminish site traffic for Rightmove. The knock-on impact could cause some advertisers to lower their spending, and make estate agents cut some listings. This is a risk going forward.
However, I don’t see this as being a long-term issue. The UK’s relatively unscathed from the tariffs. It’s one of the few countries still actively pursuing a trade deal. Further, if the Bank of England committee feels the need to support financial markets by cutting interest rates, this would be a good thing for Rightmove.
A lower base rate should cause mortgage rates to fall. This could make it cheaper for people to get on the property ladder, causing a spike in demand on the website.
Given the crazy sentiment in the market right now, I’m going to watch for further short-term pain in the stock. Yet I’m looking to deploy cash before the end of the month.
