Global markets are facing turbulent times. The cause is clear: Donald Trump has shaken the world with a series of tariffs that are unprecedented in scale and questionable in logic. The result? Widespread panic and one of the fastest stock market declines in history, reminiscent of the COVID-19 crisis. While signs of recovery are emerging, predicting the end of this turmoil is impossible.

Consequences for investors

A sudden and widespread market drop is every investor’s nightmare. Most funds are seeing substantial losses, especially passive funds like ETFs. Fortunately, a balanced investment portfolio helps mitigate such severe market shocks.

What can you do as an investor?

When faced with uncertainty, investors generally have three choices:

  • Sell: This is an instinctive reaction, but experienced investors know it’s a mistake. Selling turns a temporary paper loss into a real one and prevents you from benefiting from the eventual recovery.
  • Hold: Investing is a long-term game. Markets historically recover, and to benefit from that recovery, you must stay invested.
  • Buy more: A market drop is an opportunity to buy at lower prices, taking advantage of the inevitable future upswing. The “buy the dip” strategy can be effective but isn’t suitable for everyone.

Our general advice is to hold your investments unless your investment horizon is too short to wait for recovery. We understand that watching your portfolio decline can be stressful, but remaining patient is essential. Speaking with your financial adviser can provide clarity during uncertain times.

Is any portfolio adjustment needed?

Yes, but this already happens at the fund level. Actively managed funds make strategic decisions based on continuous market analysis. This is why a diversified mix of funds tailored to your investment goals is crucial. If you hold passive funds or ETFs, however, adjustments will be minimal since they are not actively managed.

What does the future hold?

No one has a crystal ball, and while investment science is more precise than many believe, various unpredictable factors complicate accurate forecasting. Trump’s strategy often follows a pattern: escalate tensions, negotiate, and then strike a deal. This creates uncertainty.

The coming weeks will likely be marked by continued volatility. To strengthen your portfolio, consider:

  1. Opting for actively managed mixed funds, where managers can adjust exposure in times of market stress.
  2. Spreading your investment entries over time to smooth out market fluctuations.

Understanding tariffs

Tariffs are applied when goods enter a country, paid by the importer—not the foreign exporters Trump aims to penalise. His claim that tariffs will bring economic benefits is flawed. Tariffs can either generate revenue (if imports continue) or support domestic industry (by reducing imports), but they cannot achieve both simultaneously.

The US lacks the production capacity and workforce to replace its vast imports, and shifting to domestic alternatives would likely trigger inflation.

Contact us

Feel free to contact us for questions or further information at 03 482 15 30 or via email at leven@vandessel.be.

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