A perfect example? Donald Trump’s ever-changing policies—one minute, he’s announcing tariffs on Canada and Mexico, the next, China is in the crosshairs. Trying to keep up with his fast-paced decision-making is like chasing a moving train—by the time you read this, new announcements may have already shifted the landscape again!
When Trump first announced tariffs, the market reacted dramatically, with a sharp sell-off as investors scrambled to assess the impact. But as we’ve seen repeatedly, the market doesn’t stay down for long. After the initial drop, things stabilised, some tariffs were postponed, and the market rebounded. This cycle of ups and downs is simply part of investing but its likely to be magnified with Donald Trump as president.
My point isn’t about Trump’s presidency or his policies, but rather his approach to leadership which, while it may have its positives, is likely to increase stock market volatility.
Why Does Market Volatility Happen?
In short, markets react to new information—whether it's economic data, political decisions, or unexpected global events. When something unpredictable happens (like a trade war threat), the stock market often has a knee jerk reaction, often causing sharp price movements. But over time, markets adjust, and cooler heads prevail.
This is why embracing the mindset of “expecting the unexpected” is so important. We can’t control world events, market swings, or political drama—just like we can’t predict the weather with absolute certainty. However, we can control how we respond.
Navigating Volatility as an Investor
Market volatility can be unsettling, but staying the course and trusting in your plan is key to maintaining control and avoiding knee-jerk reactions. Stock markets had a tough 2022, yet those who remained patient have been rewarded with strong returns over the past 18 months. Here are a few key tips and reminders for navigating the unexpected with confidence.
1. Don’t panic. Emotional decisions often lead to bigger losses.
2. Avoid knee-jerk reactions. Selling in a panic can lock in losses. Nothing last forever and markets will recover over time.
3. Continue regular investing. If you're investing for the long term, stick to your plan. Pound-cost averaging helps smooth out volatility.
4. Ensure you have enough cash savings to cover short-term needs without selling investments at a loss.
5. Don’t check your portfolio obsessively—it can lead to unnecessary stress.
6. Invest in a well diversified and low-cost portfolio.
Why is timing the market impossible?
I’m often asked, “Why can’t you just time the markets?” It’s a fair question, and on the surface, the idea of buying at the bottom and selling at the top sounds like the perfect strategy. After all, who wouldn’t want to maximise returns and avoid downturns?
The reality, however, is that consistently predicting market movements is virtually impossible. Even professional investors with access to vast amounts of data and sophisticated models struggle to time the market with any reliability.
In fact, attempting to time the market often leads to worse outcomes. Investors who try to jump in and out based on short-term fluctuations risk missing the best days of market growth, which can have a significant impact on long-term returns. Historically, some of the market’s strongest gains happen within just a handful of days and missing those can be costly.
Instead of trying to predict the unpredictable, the most effective strategy is to stay invested, maintain a well-diversified portfolio, and focus on long-term goals. Markets have always experienced ups and downs, but over time, they tend to reward patience and discipline.
So, while the idea of timing the market is appealing, the reality is that time in the market—not timing the market—is what truly drives long-term investment success.
“The stock market isa device for transferring money from the impatient to the patient.”
Warren Buffet
Fun(ish) Fact…
I recently came across this little nugget: the last two digits of your National Insurance number determine which day of the week you’ll receive your state pension! Completely useless trivia, but hey—every day’s a school day!
00 to 19 Monday
20 to 39 Tuesday
40 to 59 Wednesday
60 to 79 Thursday
80 to 99 Friday
