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Market corrections and volatility are nothing new. Historically, predictions of economic downturns have often been exaggerated. Over the past few years, the U.S. economy has proven resilient, weathering a global pandemic, inflation spikes, and even banking sector concerns. By late last year, many believed that inflation had been brought under control without causing major job losses.

 However, recent developments, particularly on the political front, have once again introduced uncertainty.

One of the key factors shaping the market today is the return of aggressive tariff policies. While the initial reaction to last year’s election results was positive, recent comments by the administration suggest that tariffs will play a larger role in economic strategy than previously anticipated. In a recent interview, the president indicated that trade restrictions are not just a temporary measure but a long-term plan, potentially leading to short-term disruptions.

As a result, analysts have adjusted their forecasts, increasing the likelihood of an economic slowdown. Although warning signs like decreased consumer spending and rising jobless claims exist,

 economic fundamentals remain stable for now. The Federal Reserve has reiterated that while risks are present, the economy is still in a relatively strong position.

Mr. Market’s unpredictable nature often tempts investors to chase trends. Many rushed into tech stocks last year, only to panic when concerns over artificial intelligence models caused a temporary sell-off.

 Trying to predict market movements based on short-term events is a losing strategy. Instead, investors should take a step back and focus on building a resilient portfolio.

Diversification has always been a key strategy to manage risk, but traditional methods like the 60/40 portfolio (60% stocks, 40% bonds) have proven unreliable in recent years. In 2022, both stocks and bonds declined simultaneously, leading to significant losses for investors who relied on this approach.

Given these challenges, investors are increasingly looking beyond traditional asset classes. Alternative investments, including private equity, hedge funds, and private credit, offer opportunities for growth and protection against volatility. Unlike public markets, these investments are less affected by short-term swings and can provide a more stable return profile.

Achieving a well-diversified portfolio requires more than just picking a few different assets—it demands a strategic approach. Alternative investments have long been used by institutions and endowments to reduce risk while maintaining strong returns. Individual investors can benefit from a similar strategy, provided they have access to the right expertise and opportunities.

Market uncertainty is nothing new, and while tariffs and political changes may introduce short-term volatility, they don’t alter the fundamental principles of sound investing. Instead of reacting emotionally to headlines, investors should focus on long-term strategies that prioritize diversification and resilience. Mr. Market will always be unpredictable, but investors who stay disciplined and take a broader perspective will be better positioned to navigate the ups and downs of the investment landscape.

How Can Investors Stay Ahead Amid New Tariffs and Market Volatility?

The PCE Inflation index began to rise from September 2024, the very month in which the Federal Reserve (the “Fed”) began cutting rates. December’s figure reached 2.6%, the highest reading since April that year. Core PCE inflation (excluding Food and Energy) reached 2.8% (later revised upwards to 2.9%). These higher readings suggested that inflation might be stickier than expected, if not resurgent.

The meeting minutes, accordingly, show a clear change in mindset, with some commentators even describing the tone as “hawkish”.

 Inflation risks were perceived as “skewed to the upside” owing to the persistence of core inflation and the unknown impact of trade policy.

The topic of liquidity management and the future path of Quantitative Tightening (QT) was also discussed. It seems possible that the Fed will begin to slow or pause the tightening process in the Spring, in line with the mid-2025 debt ceiling deadline and concerns over banking reserves, which are nearing $3 trillion, close to the “ample reserves” threshold.

The latest CPI inflation figures, updated on February 12th, appeared to reinforce the view that inflation may be back on an upward path, rising for the fourth consecutive month to 3% (compared with 2.4% in September). The most recent PCE figures however, released on February 28th, show a more benign picture, with both Headline and Core figures down from December’s readings, at 2.5% and 2.6% respectively.

The overall economic situation also appears solid, with GDP growth of 2.3% for the 4th quarter (2.8% overall for 2024),

One jarring note in the data, pointed out in various commentaries, is the drop in personal spending, which fell by 0.2% in January, the fastest drop in four years when adjusted for inflation (-0.5%).

 After growth of 0.7% in December, this raises the question of whether consumers are beginning to get nervous.

This mixed data—solid growth yet spending weakness—reinforces the Fed’s cautious ‘wait and see’ stance, and has been corroborated by recent statements from Fed officials.

With definitive data comparatively sparse, the market has little to do but speculate about the future. The three main items of concern are trade, immigration, and fiscal policy, all of which depend to a great extent on the decisions of the current U.S. administration under President Trump, whose actions are less easy to predict than many other world leaders.

Tariffs on Chinese imports, along with steel and aluminum, are already in effect, while those on Canada and Mexico are in what might be called a state of flux.

 While further clarity is hoped for on April 2nd, where details on tariffs for other trading partners are set to be revealed, the language of the administration suggests nothing should be regarded as fixed, as tariffs are as much a geopolitical tool as they are a purely economic measure.

Meanwhile, everyone - including the Fed - is waiting to see what form the Trump administration’s efforts towards achieving budget sustainability will take. The centrality of tax cuts, combined with somewhat vague commitments on reining in government spending, make for a tangled skein.

Markets are more or less certain that the coming meeting will see rates held where they are, with a consensus emerging (as of the time of writing) that there will likely be three cuts this year.

The coming year will prompt many important discussions about the future of the U.S. economy and its financial system. For instance, a new congressional panel is being set up to examine the role of the Fed, and whether it should be more focused on inflation as opposed to having multiple mandates.

 Ultimately, it is trends like these that determine the long-term future of the markets.

Having a long-term view makes it possible to focus on a small number of high-impact macro trends, rather than getting caught up in the innumerable, ephemeral imponderables that crowd in via the news feed daily. It also makes for an investment portfolio that is robust to short-term volatility and flexible enough to adapt to the unexpected.

Fed Decision March 2025: The Waiting Game

Tapping into Kuwait’s widely favorable and inviting investment climate, the regionally renowned investment and wealth management powerhouse, The Family Office, recently landed in Kuwait, introducing a competitive suite of investment and wealth management solutions, tailored to Kuwait’s most aspiring high-net-worth individuals (HNWIs), ultra-high-net-worth individuals (UHNWIs), and affluent investors. Committed to redefining successful investment and wealth management in Kuwait, The Family Office merges tech-driven solutions with over two decades of experience and the resources of a global network of leading asset management partners.

“For decades, private markets investment opportunities were largely reserved for institutions and ultra-high-net-worth individuals. However, fintech has reshaped access to investment opportunities, enabling many aspiring individuals to secure a better, more stable future through inclusive, democratized, and tech-driven investment solutions,” said Abdulaziz Al Humaidhi, Deputy CEO of The Family Office Investment Advisory Company (Kuwait). “Despite how accessible investment tools are today, institutional-grade opportunities in private equity, private credit, and real estate remain exclusive. We bridge this gap through global partnerships with world-renowned asset management market leaders, including BlackRock, KKR, Carlyle, and Apollo.”

Al Humaidhi elaborated that modern technology paired with expertise-led acumen and solid global connections are at the heart of The Family Office’s efforts to diminish investment gatekeeping and offer clients a wider range of portfolio types and investment opportunities that respond to their varying investment aspirations, risk preferences, and time horizons.

“Regardless of portfolio preferences, our independent investment team conducts rigorous due diligence in sourcing and selecting high-quality investment opportunities. In fact, only 4% of the investment deals we evaluate  pass our thorough screening process to be considered viable opportunities. By prioritizing quality over quantity, we continue to earn our clients’ trust in the critical endeavour of growing their wealth,” Al Humaidhi added.

In addition to the one-on-one advisory that The Family Office’s financial advisors offer to clients, the company also fortifies its services with advanced digital tools designed to enhance our clients’ investment experience and foster utmost transparency. This includes portfolio simulation, which allows clients to visualize and simulate a decade’s worth of portfolio performance, giving them an overview of their current choices and future outcomes. Such insights enable clients to make investment choices that are aligned with their strategies and long-term goals. 

Other digital tools that The Family Office offers include The Marketplace, where clients can trade shares in private market investments, and All In One Plus, presenting investors with consolidated financial insights and enabling them to monitor all their assets and liabilities for a holistic view of their financial position.

For more than 20 years, The Family Office has gained the trust of over 800 clients globally, managing over $ 2.1 billion in assets. Licensed and regulated in Bahrain, Saudi Arabia, United Arab Emirates, Switzerland, the United States, and Hong Kong, the company’s expansion to Kuwait follows its acquisition of the necessary licenses from the Capital Markets Authority (CMA) – Kuwait.

The Family Office Company B.S.C. (c) in Bahrain and Dubai, its Riyadh-based wealth manager, The Family Office International Investment Company, and its investment advisory firm in Kuwait, The Family Office Investment Advisory Company (Kuwait) K.S.C. (c) are regulated by the Central Bank of Bahrain, the Dubai Financial Services Authority, the Capital Market Authority of Saudi Arabia, and the Capital Markets Authority of Kuwait. Serving hundreds of families and individuals, the firm helps clients achieve their wealth goals through custom-made investment strategies that cater to their unique needs.

Certain services and products offered by The Family Office may not be available to investors in certain jurisdictions where they reside. Investors are responsible for ensuring compliance with local laws and regulations before accessing our products.

The Family Office Company B.S.C. (c) is a Category 1 Investment Firm regulated by the Central Bank of Bahrain, C.R. No. 53871 dated 21/6/2004. Paid Up Capital: US$10,000,000. The Family Office Company B.S.C. (c) only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

The Family Office International Investment is a joint stock closed company owned by one person. Paid-up capital SR20 million. CR No. 101060698, Unified National Number 7007701696. Licensed by the Capital Market Authority (no. 17-182-30) to carry out arranging, advisory and managing investments and operating funds, with respect to securities.

The Family Office Company B.S.C. (c), DIFC Branch is a recognized company in the Dubai International Financial Centre (DIFC) under registration number 6567 and regulated by the Dubai Financial Services Authority (DFSA) as a Category 4 to carry out Arranging and Advising Services. The Family Office Company B.S.C. (c), DIFC Branch is not permitted to deal with Retail Clients (as defined in DFSA’s Conduct of Business Module).

The Family Office Investment Advisory Company (Kuwait) K.S.C. (c), incorporated in 2024, is regulated by the Capital Markets Authority State of Kuwait and authorized to conduct Investment Advisory and Subscription Agent (license no. AP/2024/0009).  Paid-up capital KWD 1,000,000, CR no. 511443.

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