Trump Tariffs - How you can navigate uncertain markets and grow your wealth in times of volatility

The latest headlines around market turbulence have understandably left many investors feeling unsettled.

US trade tariffs announced by Donald Trump on 2 April – “Liberation Day” – sent the markets into a frenzy. Global indices dipped as confidence waned and panic grew, only to rise sharply after Trump announced a pause in most of the tariffs for 90 days.

The volatility of the past few weeks has been significant, but short-term fluctuations driven by global events influencing investor confidence are normal. Market crashes are inevitable, but history shows that staying the course is usually the best strategy for recovery as it allows you to benefit from the market’s long-term trend toward growth.

Read on to find out how to navigate uncertainty and continue growing your wealth amid volatile markets.

Significant drops are a common occurrence in markets

A key part of ensuring you don’t make knee-jerk reactions to short-term trends is to realise just how common significant market drops are and how, despite this volatility, markets have historically continued to deliver strong long-term returns.

Indeed, double-digit drops on world stock markets happen in more years than they don’t.

The graph below shows the biggest stock market falls between 1971 and 2023 on the MSCI World Index.

Source: Schroders

As you can see, falls of 10% or more happened in 30 of the 52 years, while more substantial falls of 20% or more occurred in 13.

In the context of the current volatility, data from the London Stock Exchange shows that the FTSE 100 dipped by around 12% before starting to grow again.

Despite these dips, the MSCI World Index and other indices continued to grow over the long term.

The graph below shows the growth of $1 on the MSCI World Index between 1970 and 2019 alongside significant events that have caused market downturns.

Source: Harvest

As you can see, market downturns are a common occurrence, but long-term growth is also consistent. So, it’s a good idea to focus on the bigger picture and not be swayed by short-term fluctuations.

Exiting the market means you will miss the opportunity to recover

When markets decline sharply, it can be tempting to sell in an attempt to cut your losses. But a drop in value is only a paper loss until you actually sell. By staying invested, you give your portfolio the chance to recover, which is something markets have reliably done over time.

For example, research by Schroders shows that an investor who moved to cash in 1929 after the first 25% drop during the Great Depression wouldn’t have broken even until 1963. In contrast, staying invested in the stock market would have seen them recover by early 1945.

Similarly, an investor who switched to cash after the initial 25% decline in 2008 would still not have recovered their losses today. Meanwhile, if you had stayed invested, you would have recovered in around 2013.

Exiting the market during periods of volatility can be just as risky as reacting to major crashes.

The Vix – sometimes known as the stock markets “fear gauge” – is a measure of the amount of volatility traders expect for the US S&P 500 index during the next 30 days. After Trump announced the tariffs, the Vix reached its highest point since the onset of the pandemic in 2020.

However, the research conducted by Schroders shows that selling during periods of high volatility would have been a bad idea.

They analysed a strategy where investors sold S&P 500 stocks whenever the VIX rose above 33.2, then re-entered the market once it fell below that level, tracking how $100 would have performed under those conditions. The results are shown in the graph below.

Source: Schroders

As you can see, selling when the Vix was high would have returned 7.4% a year, while remaining continually invested in stocks would have returned 9.9%.

So, abandoning the stock market for cash in response to a major downturn may seem like a sensible choice in the short term, but it can damage your recovery and long-term journey toward growing your wealth.

A financial planner can help you weather the storm during volatile times

During times of volatility, it can be difficult to drown out the noise and stay focused on the bigger picture – but that’s where we can help.

We can work with you to create a plan centred around your unique long-term goals and aspirations. By focusing on long time horizons and understanding that market dips are a natural part of the journey toward growth, we can help you stay on track, even during periods of volatility.

We can also strengthen your portfolio against market fluctuations by diversifying your investments, helping to offset potential losses with opportunities for growth. At the same time, we will ensure your strategy remains aligned with your goals, suitable for your circumstances, and actively managed as your needs evolve.

Get in touch

To find out more about how we can improve your stability and your chances of capturing long-term growth, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.