If you have listened to any radio, watched any TV or glanced at newspaper headlines this week, you’ll have heard that markets have “plunged” following America’s tariffs on much of the rest of the world. You can watch our video from last week for more detail.
On Wednesday this week, President Donald Trump sparked a surge in financial markets across the world, posting on Truth Social that there will be an immediate pause to tariffs for 90 days. During this period, 10% will apply across the board as negotiations take place, and China will be the exception, charged a tariff of 125%.
When markets fall, as they did earlier in the week, well-diversified investments fall too, and that can be uncomfortable, especially for those holding investments, such as ISAs and pensions. It is also a challenging time for our advisers, who are aware that these types of market dips will rear their heads multiple times in their careers, and regularly warn clients of this, but that doesn’t make it any more pleasant when it happens! Their main concern is helping you feel at ease and making sure your plan stays on track, rather than reacting emotionally and deviating from it.
When we invest money into the markets, whether it’s for ourselves or on behalf of our clients, we know that these dips will happen. We can factor them into financial planning through cashflow forecasting, building in “what if” scenarios for market downturns. The tricky thing is, we don’t know when they’ll come or what will trigger them. No one does!
Think of a difficult conversation with your boss, an awkward discussion with a partner, or a dreaded medical procedure; you know it will happen at some point, but that doesn’t make it any more pleasant.
So, let’s look at what history can tell us about investing.
Volatile Markets
Imagine that you had a lump sum to invest, but before committing it to the financial market, you tell yourself that you’ll wait until the timing feels right, no geopolitical unrest, no wars, no pandemic, no crises. The problem is that time rarely comes.
If you were making that decision in the year 2000, say, you would have faced the dot-com bubble bursting, 9/11, the invasion of Afghanistan, the 2008 financial crisis, the Eurozone debt crisis, the coronavirus pandemic, the list goes on. If you waited for a perfect time to enter the market, you’d still be waiting today. But global equities didn’t wait.
If we look at a chart of global equities, or rather shares in companies from around the world, from the end of 1998 to 8th April 2025, we see a staggering total return of over 580%. There have been many sharp drops in that time, but over the long-term, markets have recovered and grown.
For example, markets were ticking along earlier this year, until they dropped sharply last week, before shooting upwards towards the end of the week. That drop particularly grabbed headlines and shook investor confidence. But let’s zoom out.
When we look at the bigger picture, we view money in the markets as long-term investments (like our pensions or ISAs), and that big dip starts to look much less significant.
Of course, the discomfort of not knowing what happens next remains, and if you just invested last week, zooming out might not feel very comforting for you. Still, it can help to look backwards and examine past market dips, how alarming they felt at the time, and what happened next.
Take the coronavirus pandemic: the drop was steep and sudden, and can be easily seen on this chart, but markets rebounded strongly over the following two years. The dot-com bubble bursting led to a longer downturn, but again, investors with patience and a plan were eventually rewarded.
Dips like these are never pleasant. But they’re not new, and they’re not unusual. They are part and parcel of investing.
Should I Move to Cash?
During uncomfortable times like these, you may be considering whether to move your investments into cash. Markets fluctuate, that’s volatility, but a loss is only realised if and when you sell. If you sell during a market dip, you’re not just making knee-jerk reactions, but you’re also trying to time the market twice: once to find the right time to get out, and once to get back in.
The reality of human nature is that people tend to reinvest only when markets feel “safe” again, often following a recovery. The problem here? By then, you’ve missed the bounce. This means you’ve locked in the loss and missed the upside. We can see from the bounce in markets at the end of this week that you don’t want to be caught on either side of volatile markets like these.
The problem this poses is logically obvious, but can lose its meaning when emotions are high: if you withdraw and re-enter when markets have recovered, you will have missed out on the bounce whilst you were in cash, and therefore you are guaranteed to have made that loss. Furthermore, when this dip happens again, will you sell your investments when markets are low, and go through it all again?
Will you go through this cycle again the next time the market dips?
This kind of reminder can feel patronising when markets are rising. But, during turbulent times, it’s worth repeating. In fact, it’s our duty to repeat it!
The aim of investing, rather than holding assets in cash, is the potential for greater long-term returns. Given that inflation pushes prices higher every year, cash loses value in real terms over time. For example, in 2000, the cost of a 1st class stamp was 27p. In 2025, they now cost £1.70!
Of course, cash isn’t a bad asset. For some, holding a larger proportion of cash is the right thing to do – everyone should keep enough to handle emergencies, a rainy day. However, investing is part of a long-term financial plan for a reason. You should move to cash because a life event warrants it – not because of short-term panic or dips in the market.
Summary
Market dips are never pleasant, but they are not unexpected. With the right financial plan and the right perspective, you can weather these storms. That’s where we come in.
Our role isn’t just to invest for you, it’s to guide you through the highs and the lows. We want you to feel confident when markets are calm, and also when they’re turbulent. Your financial plan has been carefully thought out to account for market shocks like this, it’s built to help you reach your goals through good times and bad.
If you’re feeling uncertain, have questions or just need some reassurance, please reach out to your financial planner.
