Donald Trump completed the first 100 days of his second term as US president on 29 April 2025. Prior to the election, Trump outlined ambitious plans for the country and as soon as he took office, he began signing executive orders to push through his manifesto.
One of the president’s most significant policies was to introduce tariffs – the taxation of goods imported to the US – on countries around the globe. These tariffs will increase the cost of imported goods, in the hope that consumers purchase more US-manufactured products and boost the domestic economy.
Trump’s tariffs have affected economies around the globe as many companies that export goods to the US could suffer. As a result, governments have introduced their own retaliatory tariffs and, in some cases, entered an escalating trade war with the US.
For example, Trump increased tariffs on China several times before eventually announcing on 9 April that imports from the country would face a tax of 145%.
Conversely, the president has paused or reduced tariffs on other countries as governments negotiate trade deals with the US.
All this uncertainty, and the negative effect that tariffs could have on the economy, has caused significant stock market volatility. Naturally, you might be concerned about how this could affect the value of your investments, and whether you should adjust your strategy.
Read on to learn more.
Stock markets initially reacted well to Trump but the introduction of tariffs caused a crash
When Donald Trump was elected for a second term, the markets reacted well. The president ran on a campaign of pro-business laws, promising to cut red tape and reduce taxes on companies.
This led to the “Trump bump” – an initial rise in the value of US stocks – as investors felt confident that the economy would grow during Trump’s second term.
According to CNN, the S&P 500 closed at a record high on 19 February 2025.
However, when tariffs on Mexico and Canada came into effect and the levy on Chinese goods increased, the markets began to react. On 4 March 2025, the S&P 500 dropped by 1.2% and reached its lowest level since November, effectively erasing the gains made after Trump won the presidency.
As the situation escalated and countries retaliated with their own tariffs, the markets continued falling. On 10 March 2025, the S&P 500 and the Dow Jones index both reported their largest single-day drop of the year, and the Nasdaq index experienced the biggest single-day decline since 2022.
Similarly, stock markets in other countries experienced volatility. On 25 April 2025, This is Money reported that since Trump’s so-called “liberation day” when he introduced tariffs:
- The FTSE 100 had fallen by 2.5%
- Germany’s DAX index had lost 2.2%
- Japan’s Nikkei index had shrunk by 2.4%.
These total losses remain despite the fact that markets bounced back after Trump announced a temporary pause on tariffs for some countries or industries.
Consequently, no matter where you are invested, you may have seen the value of your investments fall.
Although he has paused certain tariffs, Trump appears committed to the policy and there could be further market volatility while the global economy adjusts.
This could mean that the value of your investment portfolio shrinks further in the future, and you may wonder whether you should adjust your strategy to avoid this.
Selling investments during a period of volatility could mean you miss out on future returns as markets recover
When markets reacted to Trump’s tariffs, many investors panicked and the volatility was partly driven by mass sell-offs.
These investors may have been concerned that markets would continue to suffer and cashing out now would prevent further losses. You might consider doing the same.
However, historical data suggests that periods of volatility are typically temporary, and the markets will eventually recover and continue growing in the long term. As such, selling your investments could mean that you lock in losses now and miss out on future returns when the markets bounce back.
In comparison, if you hold your investments and stay with your current strategy, you may continue building wealth and working towards your financial aims once the volatility has passed.
There are many examples of this happening throughout history. The 2008 financial crisis is one such case.
After the largest housing bubble in history burst and financial institutions around the globe began failing, stock markets fell into turmoil.
Data from the London Stock Exchange (LSE) shows that between the 31 January 2008 and the 28 February 2009, the FTSE All-World – an index of large- and mid-cap companies around the globe – fell by 35.68%.
If you were invested at this time, you could have seen your portfolio shrink significantly and you likely would have been concerned.
In the years that followed, the global economy suffered and recovery was slow. However, between 31 January 2008 and 31 December 2012, the FTSE All-World grew by 3.11% as the markets eventually bounced back.
Had you sold after the initial crash, you would have locked in losses of more than 35%. Yet, if you shut out the noise and held your investments until the end of 2012, you would have recouped your losses and achieved more growth.
In fact, if you put your wealth in the FTSE All-World on 31 January 2008 and remained invested until 1 May 2025, you would have generated growth of 53.13%.
This is despite the significant volatility caused by the 2008 financial crisis and subsequent global events, including several wars and the Covid-19 pandemic.
While past performance doesn’t guarantee future returns, the current volatility caused by Trump tariffs could be much the same as the 2008 financial crisis and other past stock market crashes.
So, it’s important to resist the temptation to panic and sell investments prematurely. We can help you manage your concerns by reviewing your investment portfolio and the growth you’re likely to achieve.
In many cases, you may find that you’re still on track to meet your financial aims, despite the current volatility.
Get in touch
If you’re concerned about how tariffs and market volatility could affect your portfolio, we can support you.
Please get in touch or email us at advice@mlifa.co.uk for more information.
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.