Stock markets on the slide: Expert Roland Rupprechter still sees good opportunities on the stock market.

US President Donald Trump's all-round trade policy blow has caused share prices to plummet even further worldwide. The question is: what happens next and what should investors bear in mind? VN spoke to Dornbirn based stock market expert Roland Rupprechter, MBA, CPM, CEFA, Managing Director of R&B Research und Vermögensmanagement.

How do you assess the current developments on the stock markets?

For us, the announcement of high US tariffs by US President Donald Trump is the most aggressive and far-reaching step to date in the course of the US President's already harsh trade policy.

We were surprised by the extent of the stock market correction, as China, Japan and the EU only trade an average of 15% of their exports with the USA.

Many stock market segments have not recorded such large losses since the Covid-19 pandemic in 2020.

The political course changes in the USA have contradictory economic effects for us.

In the area of trade, we expect tariffs to be an integral part of US trade policy and an instrument for increasing revenues. We expect the average effective US tariff rate to stabilise significantly lower at around 15% - but it could take months to reach this level. Until then, we expect numerous changes in the tariff mix and the renegotiation of free trade agreements.

Regardless of the amount, the tariffs will increase inflationary pressure in the US and the trend towards persistently high money market interest rates. The risk of recession will also increase, even though Fed Chairman Jerome Powell currently only expects the economy to slow down.

The decisive factor for equity investments in the face of interest rates remaining high is whether growth can keep pace. We see a development that could make this possible if the technology growth spurt of recent years continues and the deregulation promised by Donald Trump provides an additional boost. We believe that US companies will retain their global leadership position due to their robust growth and mega forces - such as artificial intelligence.

We also see it as positive that China has positioned itself very competitively in Asia over the last five years. It generates a large part of its trade surplus from this region, not with Europe or the USA.

Europe's economy is also likely to be more resilient than the stock market correction would suggest. Last year, the DAX companies achieved their third-best result in their history, eleven DAX companies earned more than ever before, macroeconomic conditions improved in the last quarter and inflation in Europe is at just 2.2%, the lowest level in the western world.

For both equity markets, China and Europe, the valuation discounts to US equities are at historic levels. A ‘reversion to the mean’ process is likely to have begun.

Against this background, we see the current market correction as an above-average buying opportunity for long-term investors.

Is it a short-term correction or the start of a longer downward trend?

On average, Vorarlberg investors are safety-orientated. The main asset classes are money market investments, savings accounts and creditworthy bonds. If shares are added, their share is usually between 20 and 40 per cent.

There have been significant price gains in the bond sector in recent days, as demand has increased from investors looking for safe investments in view of the sell-off on the stock market. The yield on 10-year Austrian government bonds has fallen below the 3 % threshold.

In contrast, equity investments lost as much as they last did at the start of the coronavirus pandemic. The US benchmark index S&P 500 experienced its sharpest two-day slump since March 2020, while the German benchmark index is trading around 20 per cent below its record high from March. The sell-off destroyed a stock market value of more than five trillion US dollars.

As equity markets generally react too strongly to the initial shock, we recommend that investors hold on to their positions. We do not consider hectic action in an environment dominated by political emotion and forced position adjustments to be expedient. We are convinced that, despite the tariffs, the world's largest companies will continue to earn average returns on equity that are significantly higher than current bond yields.

So buy now?

We are convinced that 2025 - like 2020 - will offer many investors an above-average opportunity to lay the foundations for long-term wealth accumulation.

What would be possible turning points at which the markets could stabilise again?

The fear of a global trade war has now spread to all sentiment indicators and has entered clearly pessimistic territory. The put/call ratio for equities on the Chicago Board of Options Exchange (CBOE), the largest US exchange for financial derivatives, reached its highest level in the past twelve months today. The peak of protectionist rhetoric under the Trump administration could be reached in the coming days. As many technical indicators such as the relative strength index (RSI) have also reached extreme levels, the likelihood of a countermovement is increasing. However, market volatility is likely to remain high in the coming weeks as the risk of reciprocal retaliatory measures remains high and will cause uncertainty.