2 April, 2025, marked a significant moment across financial markets as a new set of tariffs imposed by the Trump administration officially took effect.

These tariffs, targeting pretty much everyone, have sparked concerns over escalating trade tensions, market volatility, and fears of a US recession.

We’re here with some insight to help you navigate these choppy waters. Let’s look at these events, the bigger picture, and why long-term investors should remain focused on their goals.

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‍How the markets reacted:

When the tariffs were unveiled, markets responded negatively with heightened volatility. The S&P 500 and Nasdaq have dropped around 9%⁽¹⁾ with notable downturns in sectors most affected by the tariffs, such as technology, automotive, and consumer goods.⁽²⁾

Many multinational corporations, heavily reliant on global supply chains, faced investor concerns over increased costs and potential retaliatory measures from other countries.

Uncertainty rained around the long-term implications of these tariffs, which fuelled uncertainty about growth, fears of a global trade war, increased inflation, and a possible recession. ‍

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Why your portfolio likely took a hit:

There are a lot of factors at play, but here’s a one-minute explainer of why the tariffs have affected a lot of investor portfolios

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• Trade tariffs on US imports are likely to disrupt global trade. It makes doing business with the U.S. (the world's largest economy) more expensive for everyone.

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• This is bad news for international companies selling into the U.S. and for American firms that rely on overseas supply. 

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• With other countries already hitting back with their own tariffs, markets are facing a lot of uncertainty. 

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• When it’s harder to predict how global companies will perform, investors tend to get nervous. 

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• This triggered the big global sell-off we’ve seen since the announcement, with some investors and experts worried this could slow the US economy or even trigger a recession.

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Zooming out — trade disputes are nothing new:

Tariffs have led to markets experiencing similar disruptions in the past. Looking back at previous tariffs, such as those imposed in 2018 under the Trump administration, markets initially reacted with turbulence before stabilising.⁽³⁾

Markets tend to overreact in the short term, but as businesses adapt and new trade agreements emerge, they often recover.

The key lesson for investors is that while short-term downturns may be unavoidable, history has shown that well-diversified portfolios tend to outperform over the long run.

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What our experts are saying:

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At Chip, we partner with experts at some of the biggest asset managers in the world.

These investment firms have navigated through decades of market ups and downs, and fund managers will likely adopt a mix of strategic and tactical approaches to navigate the volatility triggered by the Trump tariffs.

If you would like more details around how our partners are responding to events, we’ve pulled together some useful links for you.

• BlackRock response: Here
• Vanguard response: Here

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We also have some links that can help you understand more about market volatility, and some of the questions you should ask yourself if you haven’t started investing yet. 
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• How to handle market volatility: Here
• Your investing checklist: Here 

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Why investors should stay the course:
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One of the golden rules in investing, it’s that the worst days in the market are often followed by some of the best. Reacting emotionally to short-term swings can lock in losses and prevent investors from benefiting when markets rebound.

Consider past market corrections – those who stayed invested during major downturns, such as the 2008 financial crisis or the COVID-19 crash, ultimately saw strong recoveries in the months and years that followed.⁽³⁾

History tells us, the largest bounces often follow the steepest declines: Over the past 25 years, investors who missed the best five days of market performance in the S&P 500 earned a return 36% lower than investors who remained in the market for the whole period.⁽⁴⁾ 

In the last 20 years of the S&P 500, 7 of the best 10 days occurred within 15 days of the worst 10 days.⁽⁵⁾

Past performance is not an indicator of future performance.

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Key takeaways:

• Markets are resilient: While tariffs may create short-term instability, they do not define long-term market performance.
• Diversification is key: A well-balanced portfolio can help mitigate risks associated with specific sectors affected by tariffs.
• Stay invested: History shows that remaining in the market through downturns has yielded strong long-term returns.

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This story is still unfolding and dominating headlines. But while Trump’s trade tariffs will continue to have implications for the economy and markets in the short-term, long-term investors should stay calm and keep sight of their bigger goals.

Volatility can be uncomfortable, but markets have a strong track record of bouncing back over time. Stay the course and stay strong.

Check back soon,

Stephen. 

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Sources: (1) Accurate at close of S&P 500 and Nasdaq on 7 April 2025. Data from MorningStar Inc. (2) Wall Street Journal (3) FS Insight (4) Morningstar (5) JP Morgan.

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