What’s Happening in the Markets?
As we move into the second quarter of 2025, the financial landscape has changed markedly. Initially, there were high hopes for economic growth, driven by tax cuts and deregulation. However, optimism began to fade following actions taken by the Trump Administration starting in late January and in response to the President’s rhetoric regarding tariffs.
The market largely underestimated the impact of impending tariffs until the official announcement on April 2. A steep sell-off occurred in the equity markets immediately afterwards. The tariffs, particularly given their magnitude and broad base, have sparked fears of a global trade war, economic recession and even stagflation.
Looking ahead, several scenarios could unfold. One possibility is that continued trade tensions and tariffs could lead to prolonged market volatility and slower economic growth. Alternately, if negotiations lead to reduced trade barriers or changes in course by the administration, we could see temporary stabilization and potential recovery in the markets. Additionally, the Federal Reserve’s response to changing liquidity conditions and economic outlook could further influence market dynamics.
How Are We Responding at UCF?
Our team is closely monitoring these developments and their potential effects, both in the short and long terms. We proactively lowered the equity exposure of the UCF Balanced Fund in early March; all three Balanced Funds are slightly underweighted in equities at the moment. The Total Equity Fund is diversified with International Equity, which outperformed U.S. Equity year-to-date. The Fixed Income Fund benefits from a dynamic duration, environmental social and governance income-focused strategy. We are staying diversified and nimble in this uncertain world and will continue to actively monitor global markets and potential impacts to our investment funds.