Trade and Your SMSF: Bulletproofing and Positioning for Best Results

Are you watching the news about U.S. trade policies and tariffs and wondering what it means for your hard-earned investments in the Australian stock market? You're not alone. The uncertainty swirling around global trade can leave even seasoned investors feeling uneasy. So, what can you do to protect and even grow your portfolio during these turbulent times? Uncertainty on the ASX: Why 2025 Has Investors on Edge The ASX has had a choppy start to 2025, largely driven by the ongoing back-and-forth between the U.S. and China on trade policy. While a few tariff pauses have sparked short bursts of optimism, they haven’t been enough to steady the broader market. Investors are still facing a lot of unknowns, especially with many ASX-listed companies exposed to either U.S. markets or Chinese manufacturing. That mix of global risk has made it harder to feel confident about long-term stability, and it’s led many to rethink how they approach investing in this kind of environment. Dollar-Cost Averaging: A Steady Strategy When the Market Isn’t In times like this, dollar-cost averaging (DCA) really stands out as a smart and practical approach. Instead of worrying about whether it’s the “right time” to invest, DCA has you put in a fixed amount at regular intervals, regardless of market ups and downs. When prices are low, you get more shares; when they’re high, you get fewer. Over time, this helps smooth out your average cost and builds your portfolio steadily. It also takes the stress and emotion out of investing, which can be a huge relief when the news cycle is all over the place. DCA isn’t flashy, but it works, especially when markets are unpredictable. Why Holding Cash Isn’t Just Playing It Safe, It’s Playing It Smart Cash doesn’t get much attention in bull markets, but in uncertain times, it can be your portfolio’s secret weapon. Having some cash on hand, often called “dry powder”, gives you options. It can cushion the blow if the market drops, and more importantly, it lets you jump on good opportunities when stocks are down. And those opportunities may be approaching fast: if a strong rebound takes shape, selectively deploying cash into high-quality, fundamentally sound companies could be one of the best moves you make. The key is to stay selective, focus on businesses with solid balance sheets, competitive advantages, and long-term growth potential. Too much cash can hold you back, but the right amount, used wisely, can give you a serious edge when the market turns. Bonds in the Balance: Navigating the U.S. and Australian Fixed Income Landscapes The U.S. bond market has experienced notable volatility, initially showing signs of decline due to concerns about economic growth. However, this trend reversed following President Trump’s announcement of sweeping tariffs in early April. The subsequent spike in Treasury yields reflected growing investor anxiety over potential increases in inflation and the possibility of an impending recession. At the same time, the U.S. dollar, traditionally considered a safe-haven currency, has weakened significantly, falling by around 10% year-to-date. This decline is attributed to prevailing uncertainty surrounding U.S. trade policies, rising inflation, and broader concerns about the direction of the nation’s economy. Former Treasury Secretary Janet Yellen has voiced concern, suggesting that these developments indicate a “loss of confidence in U.S. economic policy.” The scale of President Trump’s tariff announcement on April 2nd caught both economists and the market off guard, triggering a sharp selloff in the S&P 500, which dropped over 10% in just two days. The bond market also reacted strongly, with yields on 2-year Treasury notes experiencing their most significant intraday increase since 2009. This has raised concerns that international investors may be reconsidering their exposure to U.S. dollar-denominated assets, including Treasuries, amid ongoing trade uncertainty. As of late April 2025, yields on U.S. Treasury bonds stood at approximately 4.3–4.4% for the 10-year maturity, around 4.75% for the 20-year bond, and about 4.6% for the 30-year bond. By comparison, Series I Savings Bonds issued between November 2024 and April 2025 offered a combined interest rate of 3.11%. Source: Trading Economics, Australia 10-year vs U.S. 10-year Note (2025) In contrast, the Australian bond market, reflected by the Bloomberg AusBond Composite 0+ Yr Index showed positive momentum in early 2025. Market expectations are currently tilted toward potential interest rate cuts by the Reserve Bank of Australia (RBA) throughout 2025 and into early 2026. This anticipation has contributed to a relative decline in Australian bond yields compared to many other developed economies. Notably, yields on Australian Government Securities (AGS) have fallen below those of U.S. Treasuries for the first time since mid-2024. As of late April 2025, AGS yields hovered around 3.9% for 3-year maturities, 4.2–4.3% for 10-year bonds, approximately 4.9% for 20-year bonds, and about 5.0% for 30-year bonds. The Australian bond market is currently viewed as offering an attractive yield profile and potential for returns. Australian bonds are well-positioned to outperform their global counterparts in the current environment. Refinancing Risks for Australian Companies: Staying Afloat in Uncertain Waters The global economic uncertainty stemming from U.S. trade policies, combined with a prevailing environment of higher interest rates, introduces potential refinancing risks for Australian companies listed on the ASX, particularly those with significant debt obligations maturing in the near term. While Australian corporations generally exhibit sound liquidity positions, having proactively managed their debt through refinancing in recent years, companies with weaker financial fundamentals or those operating in sectors more directly impacted by trade disruptions or economic slowdowns may encounter greater challenges. The current higher interest rate environment implies that companies needing to refinance existing debt will likely face increased borrowing costs, potentially squeezing profit margins and affecting overall profitability. For instance, the real estate investment trust (REIT) sector highlights the specific risk of rising interest expenses as debt matures and must be refinanced at elevated rates. Sectors particularly sensitive to economic downturns, such as consumer discretionary and certain segments of retail, may experience more pronounced refinancing pressures. In contrast, defensive sectors like healthcare, utilities, and consumer staples are generally better positioned to weather periods of economic uncertainty. Companies that demonstrate strong leadership and actively implement strategies to navigate challenges and generate positive returns are more likely to manage refinancing risks effectively. Proactive measures, such as refinancing bonds well in advance of their maturity dates, can significantly reduce the risk of default. Here are three stocks to consider for your portfolio during this time of uncertainty: Origin Energy Limited (ASX: ORG) - Navigating the Energy Transition Source: ASX: ORG, Daily Chart (2025) Origin Energy has re-emerged as a compelling name on our radar following the recent broad market correction. In a market recalibrating for lower valuations and greater earnings certainty, we see Origin offering a solid combination of resilient cash flows, strong dividend income, and clear positioning for long-term growth through the energy transition. First-Half FY25 Results Show Solid Operational Performance Despite Headwinds For the six months ending 31 December 2024, statutory profit rose to $1,017 million, up from $995 million in the same period last year. More importantly, underlying profit jumped to $924 million, from $747 million, with much of the lift driven by strength in the Integrated Gas segment. This helped offset weaker performances from the Energy Markets and Octopus Energy divisions, showcasing the diversification across Origin’s portfolio. Transition Strategy in Motion: Investing in Batteries and Wind to Support a Greener Grid Origin continues to make meaningful progress on its transition agenda. It is actively constructing large-scale battery storage projects at Eraring in New South Wales, designed to enhance grid flexibility and support renewables integration. Simultaneously, the company is moving forward with the Navigator North offshore wind project, expanding its renewable energy capacity and building long-term value in the shift toward low-carbon infrastructure. Navigating Challenges: Commodity Costs and Clean Tech Risks Remain Part of the Equation Like others in the sector, Origin isn’t immune to near-term challenges. Electricity gross profit has been pressured by higher coal input costs, and volatility in gas markets remains a source of risk. The decision to exit the Hunter Valley Hydrogen Hub, citing delayed development timelines and uncertain returns, highlights the cautious approach Origin is taking toward emerging but unproven technologies. Origin’s stake in UK-based Octopus Energy, now the UK’s largest energy retailer, posted a $24 million loss in the half as the platform continues to invest in growth and technology. While a drag on current earnings, we view this as a longer-term strategic play with potential upside in global energy retail and digital platform innovation. In a landscape where interest rates are expected to ease, Origin’s dividend yield of around 5.65%, fully franked, offers a strong value proposition for income-focused investors. The franking credits available to Australian shareholders further enhance the appeal of this dividend stream. Our View: Steady Cash Flows, Yield, and Energy Transition Exposure Make Origin a Standout We believe Origin Energy is well-suited for investors seeking exposure to the energy sector’s transformation, while still valuing dependable earnings and income. With valuations more attractive post-correction, and strategic projects already in motion, Origin offers a balanced and timely opportunity as the market recalibrates. Suncorp Group Limited (ASX: SUN) - A Diversified Financial Play Source: ASX: SUN, Weekly Chart (2025) Suncorp Group Limited has undergone a major transformation, sharpening its strategic focus exclusively on general insurance. The pivot follows the successful divestment of its banking operations to Australia and New Zealand Banking Group (ANZ) in July 2024 and the subsequent sale of its New Zealand life insurance business in January 2025. This simplification removes operational complexity and enables Suncorp to concentrate on its core insurance competency. The transition could support a more focused operating model and enhance the company’s risk profile over time. $4.1 Billion Capital Return Enhances Shareholder Value Amid Strategic Shift A standout feature of the transformation is the significant return of capital to shareholders. Following the sale of its banking division, Suncorp returned $4.1 billion through a $3.00 per share capital return and a $0.22 per share fully franked special dividend. This move delivers immediate value to shareholders and stands out in an environment where capital preservation is increasingly valued. The capital return underscores management’s commitment to disciplined capital allocation during a pivotal period of corporate realignment. First-Half FY25 Earnings Highlight Strength of Core Insurance Operations Financial results for the first half of FY25 reinforce the underlying strength of Suncorp’s continuing operations. Net profit after tax reached $1.1 billion, including a $252 million one-off gain from the bank sale. Excluding this gain, Suncorp reported $860 million in cash earnings from continuing operations. A favourable natural hazard environment supported the result, while underlying momentum in the insurance business showed encouraging signs of resilience and operating leverage. Suncorp’s General Insurance division delivered an 8.9% increase in gross written premium during the first half. This growth was driven by a mix of policy volume gains and strategic pricing responses to offset rising claims costs and a higher natural hazard allowance. The ability to navigate cost pressures through pricing adjustments remains essential for insurers managing elevated claims inflation and climate-related volatility. We See Strategic Clarity, But Long-Term Earnings Trajectory Remains Key We believe Suncorp’s streamlined model offers improved strategic clarity and the capital return reflects strong balance sheet management. However, the long-term investment case rests on the company’s ability to sustain earnings in the face of macro and environmental headwinds. We are monitoring the evolution of the insurance cycle and the firm’s ability to maintain underwriting discipline as it adjusts to its new identity as a focused insurance leader. Insurance Australia Group Limited (ASX: IAG) - Resilience in the Insurance Sector Source: ASX: IAG, Weekly Chart (2025) IAG is the parent company behind some of the most recognizable names in general insurance, NRMA Insurance, CGU, AMI, NZI, and more. With operations spanning both Australia and New Zealand, it holds a strong position in the regional insurance market. That scale gives IAG a competitive advantage when it comes to pricing, customer reach, and resilience. Strong 2024 Performance Signals Renewed Confidence IAG’s share price showed solid momentum throughout FY24, which we see as a sign of improving profitability and renewed investor confidence. This isn’t just a market bounce; it reflects the work IAG has been putting into sharpening its operations and modernizing its business. Digital Transformation and Operational Efficiency in Focus The company’s ongoing push toward digital transformation is a key reason we’re watching it closely. IAG is making meaningful changes to how it operates, with a focus on customer experience and operational efficiency. In a sector where margins can be tight, these upgrades are essential for long-term growth and profitability. Catastrophe Reinsurance Program Provides a Strong Safety Net One of IAG’s standout strengths is its catastrophe reinsurance program. For 2025, the company has protection in place for two major events up to $10 billion, with coverage starting at $500 million. This is a crucial part of IAG’s low-volatility strategy and provides a solid financial buffer against large-scale natural disasters—something that’s increasingly important in today’s climate reality. Reliable Dividend with Partial Franking Adds Income Appeal IAG offers a dividend yield of around 3.61%. While not the highest yield in the market, it’s consistent and backed by a well-capitalized business. The dividends are partially franked. Bottom Line: A Defensive Play with Upside Potential We like IAG as a long-term buy. It’s got brand strength, a clear digital game plan, and robust risk controls. While it’s not without challenges, we believe it’s well-positioned to deliver steady income and long-term value, especially for investors looking for stability with room to grow. Conclusion Navigating the current uncertainties arising from U.S. trade policies and tariffs requires a thoughtful and adaptable approach to your investment portfolio. Remember the fundamental principles of diversification across various sectors and asset classes. Consider a strategic increase in your allocation to more resilient, defensive sectors. Implement a dollar-cost averaging (DCA) strategy to help mitigate the impact of market volatility and build your investments steadily over time. Maintain a prudent allocation to cash reserves, providing both a safety net and the flexibility to capitalise on potential investment opportunities. While the U.S. bond market presents its own set of challenges, the Australian bond market may offer a relatively more stable and potentially rewarding avenue for fixed-income exposure. Be mindful of potential refinancing risks for some ASX-listed companies, particularly those with significant debt maturing in the near term and focus on companies with strong financial health and proactive debt management strategies.