Whispers of tariffs, trade wars, and stock market volatility have grown louder in recent weeks, and you may have noticed the impact on your investments.
With so much happening in markets and the world, it’s easy to feel uneasy. So we want to offer a bit of context: what’s been driving recent market movements, why it’s impacting your investments – and most importantly, what to do next.
Firstly and most importantly, we want to make clear that the stock market naturally goes through periods of calm and periods of volatility. While the recent fluctuations might seem unsettling, they are part of the usual rhythm of investing.
What should you do about all this?
If your goals and circumstances haven’t changed, the honest answer is: nothing. You can throw this update in the (proverbial) bin and get on with your day.
But if you’re feeling unsure – or just want a bit more colour on what this means for you personally – we’re here to help.
What’s actually going on?
You can think of the stock market a bit like the ocean. Currents flow beneath the surface that constantly move the value of stocks up and down. These currents can be typical things like companies announcing their profits for the year, or one business being bought by a bigger one. This leads to people buying or selling those shares, impacting the price of them.
Every so often, stock markets experience a bit more of a tropical storm, and they get choppy. These tropical storms tend to be things that impact a large number of companies all at once.
The current bad weather is being caused by the recent announcement that Donald Trump and the US government will impose worldwide tariffs on goods being imported into the country. This means that companies importing goods from countries hit by tariffs will have to pay extra. They might pass some or all of that cost onto their customers, or even cut back on how much they import. That’s bad news for businesses outside the US that sell most of their stuff to American buyers.
As a result of this, stock markets have slightly fallen in value, and investors continue to be on edge to see how things play out. There is a risk that other countries could retaliate with their own tariffs, possibly causing more volatility. In contrast, investments like government bonds have become more appealing – a helpful reminder of why diversification matters. (All Octopus Money portfolios are diversified across a range of asset classes and regions.)
What does this mean for you?
It’s important to keep things in perspective. Yes, headlines can be unnerving – but zoom out, and you’ll see that major stock markets are still in a strong place. Over the past 12 months, US stocks are up around 8%, and UK markets are up 7%.
Every period of volatility comes with the same question: What if this time is different? Should I move to cash until things calm down?
But history has shown us time and again that, on average, this leads to worse outcomes. By selling to cash, when you might not need it, you miss the ability to benefit from any rebounds in investments, and continue to receive the dividends and income that your investments pay you.
If you have any questions or would like more insights, we’re always here to help.
Moments like these are when having a coach and a solid financial plan can make all the difference. You can always book a free starter session with one of our coaches to see if our financial planning service (£299) is the right fit for you.
