keep calm and stay invested

Markets have been on a see-saw as the world digests Trump's tariff policy that risked stalling world trade and triggering a recession.  Yesterday US Treasury Secretary announced a 90 day pause in reciprocal tariffs, possibly triggered by systemic strain in the US Government Bond market. US equities surged +9.5% the largest one-day rally since 2008.  We summarise a tumultuous week in markets. 

Trump's tariff policy has shaken markets: what should investors do

What happened: Equity fears

Trump's Liberation Day unveiling a slew of "reciprocal" tariffs on the entire world stunned markets.  A base line 10% tariff from 5 April and an additional surcharge for each country from 9 April based on the size of the US trade deficit with that country.
As markets repriced the trajectory for key macro factors: growth, inflation and rates, equity markets gave up a year's returns in the space of three days.  The severity of the down turn in the first week of April 2025 was as extreme as it was in March 2020 when markets seized up with Covid.
Our view was that tariff policy is as much a negotiating strategy as it is a revenue source and that we should learn from the lessons of 2018 when considering the rhetoric.  Estimates that the new tariffs would be held at those levels indefinitely were ignoring the fact that White House representatives had stated these were starting points for negotiation.

But then what happened: Debt fears

Possibly of greater concern for the White House was actually price action in the US Treasury market on 8th and 9th April this week, where the seemed risk of systemic seizure with a dumping of dollar assets.  The fact that 1) US bonds went down (and hence yields went up), AND 2) the US Dollar declined (it should increase when yields go up), was a warning light that the US could have its own "Liz Truss" moment

What changed then: Bessent hit the pause button and markets hit the buy button

Possbily more on concern for the US bond market than the equity market, US Treasury Secretary , Scott Bessent announced on Wednesday evening that there would be a 90 day pause on the higher tariff (but the 10% base line would remain in place), for all countries except China.  News of this pause instantly reduced the risk of recession.  Equity market soared with the S&P 500 surging +9.5% back to 5,400 - the largest one-day rally since 2008

Lessons from 2018

In Trump's first trade war it took 18 months from announcement to resolution.  During that time tariffs went in and out of focus along with recession risk before markets refocused on earnings growth and on Fed rate cuts. This was in the backdrop of broader market volatility that shook markets in 4q18 This is a reminder with Trump's tariff policy it is more about forcing a deal than it is to create frictions

Keep calm and stay invested - and aligned to goals

​Near-term volatility is the cost of long-term returns.  As we reiterate to our clients: it pays to keep calm and stay invested, whilst ensuring portfolios are well diversified within and across asset classes and objectives are aligned to clients goals.  Whether investing for accumulation, decumulation, multi-asset income or direct gilts - there are different solutions available for a variety of objectives.

We will continue to be updating our UK adviser clients directly.