Tariffs bring turmoil: so far, so ugly – what could investors do?

Markets are in turmoil after Donald Trump announced sweeping tariffs on goods imported into the US. Other countries are expected to retaliate, with China announcing a 34% tariff on US goods on Friday 4 April.

All that has got investors worried. Rising prices are bad for corporate profits, for consumers and for economic growth. They also make it more difficult for central banks to cut interest rates to support the economy. As a result, stock markets around the globe fell sharply. So far, so ugly.

Amidst the fear, it’s easy to forget we’ve been here before, though for different reasons.

In the last 50 years, there have been 16 major sell-offs where the global stock market (MSCI World) fell by c.10% or more from its previous peak. We’ve seen two so far this decade alone – the first sparked by the pandemic and the second by rising inflation in 2022.

Markets were wracked by fear in all these sells offs. Each time it probably felt like nothing would be the same again.

But looking back at the long-term returns from the global stock market, events like the financial crisis and dotcom bust barely register. Despite five decades of one disaster after another the global stock market tuned £10,000 into £1.8 million in 50 years. Past performance is not a guide to the future.

When times are good, it’s easy to be rational, calm and collected. It’s when the market hits the skids that investing discipline really counts.

Just because the market is falling, it’s not necessarily a reason to buy more. And it’s almost certainly not a reason to panic sell.

Often, the best course of action is to do nothing.

This is a lot harder than it sounds. And goes against human instincts. But could pay off in the long term.

It’s almost impossible to call the bottom of the market, and it’s easy to lose money in trying.

However, if your money is invested in a well-diversified portfolio for the long-term, you should be able – and have time – to weather the toughest of storms.