This article first appeared in the AFR on 25 May 2025
There is always an indiscriminate sell-off as soon as a crisis hits, but not all companies are hit the same way. This is where active investing comes into its own.
Every financial crisis is different, but there are always some similarities that investors can learn from to help navigate the next one.
Over my 28 years in equity markets, I have lived through, and invested through, many – from the Asian financial crisis in 1997, through to the global financial crisis, the sovereign debt crisis, COVID-19, and now the turmoil caused by the US tariffs.
During those periods of stress, there are a few things I’ve learnt about how to handle a crisis and even how to take advantage of it. One important lesson is that the market always shoots first and asks questions after.
There is always an indiscriminate sell-off as soon as a crisis hits, but not all companies are impacted in the same way. This is where active investing comes into its own.
Take the most recent example where US President Donald Trump announced his “reciprocal tariffs” in early April. Markets around the world tumbled, weighed down by the uncertainty of a fast changing global trade landscape.
But the key challenge for investors was really to work out exactly what risks had been created, how to respond and then how to take advantage of them.
In the current crisis, there are two issues at play that investors are most worried about – the impact of the tariff changes and a recession. While the two issues are intertwined, they are not the same and therefore will affect individual companies differently.
Examples can help to illustrate the point, starting with Resmed, a global leader in sleep apnoea machines. When markets tumbled in April, Resmed’s shares took a hit as well. But this didn’t reflect reality and the facts told a different story.
Resmed’s machines provide a number of health benefits – not just reducing snoring but also decreasing the risk of heart disease and stroke. It means the company is less economically sensitive and demand should remain relatively stable.
Fear of recession doesn’t justify the fall in share price and most of Resmed’s products are manufactured in the US, so it’s unlikely to be badly affected by tariffs.
Astute investors recognised that the hit to Resmed’s share price wasn’t triggered by reality – the market shot first before asking questions – and this created a good buying opportunity.
Similarly, look at WiseTech which also got sold off in April.
At first glance, this might be more understandable than Resmed’s given WiseTech’s main product is CargoWise, which is a logistics platform used to move cargo around the world.
Investors feared that tariffs would reduce trade and make CargoWise less valuable. But the reality soon became apparent, which was that tariffs would make trade more complex and therefore make CargoWise more important.
Although WiseTech continues to work through governance issues, the underlying business is solid and there is a strong management team in place. Again, the market fall created an opportunity to buy into WiseTech at an attractive price.
Another stock caught up in the recent volatility is Lynas Rear Earths. The materials are a key ingredient in electronics, and China largely controls the global rare earths market, meaning Lynas is one of the few non-China rare earths producers.
Not only have the US-China trade tensions pushed up the price of rare earths, they have also made the US more reliant on Lynas’ operations. Even if the US and China come to a long-term agreement on tariffs, recent events have highlighted the vulnerability of the US in this area, putting Lynas in a strong position.
The lesson for investors is that volatility around crises creates select opportunities in individual stocks. The one thing investors can be certain of in the current environment is that volatility is here to stay, so it’s important not to panic.
As markets move fast, mindset is key. When you’re prepared for volatility, you’ll be more likely to react rationally. You don’t have to launch into action or completely change your portfolio.
Stay focused, do your homework and look for those opportunities that the crisis creates.
