Market volatility shows value of long-term approach

On the wall behind me in my office is a chart displaying the various ups and downs of the global economy over the last century.

Included within it are global recessions, world wars and various other events that have triggered financial downturns or upturns.

In terms of our own recent history, the collapse of the financial markets in the wake of the Covid pandemic is the event that comes most readily to mind.

Now, we are facing up to the latest ‘financial event’ in the form of President Trump’s so called ‘Liberation Day’ and the swingeing tariffs imposed on countries across the world.

President Trump claims that dozens of nations have responded as he wanted by reaching out to do deals that will see a reduction or removal of their set of tariffs. 

In the case of the UK, Prime Minister Starmer assures us that a trade deal is being worked on which will potentially result in more favourable terms than the current 10% across the board tariff that has been levied on UK goods entering the US market.

The response from China has been somewhat different, with both sides ratcheting up their respective tariffs and the looming threat of a serious trade war between the two superpowers.

The high levels of global volatility and the uncertainty of what President Trump will do next have triggered the inevitable turmoil we have seen in recent days on the international financial markets.

Initially, we saw three days of sustained falls across the various indexes, followed by a brief rally earlier this week. This was followed by further falls on Wednesday as the war of words between the US and China hotted up.

Even last night we had the latest twist in this saga with the President’s announcement that he was pausing tariffs on many countries for 90 days, with the resulting boost to the US markets.

As things stand, while market volatility is never a good thing, we are still some way from the deep market collapses we saw during the financial crisis of 2008 and, more recently, during Covid.

While the team at Phillip Bates & Co Financial Services are always here to field calls from clients who may have any questions or concerns about what is unfolding, it is reassuring that these have been few and far between so far.

As a couple of clients observed earlier this week, it is because we are always at pains to point out the importance of taking a long-term, diversified approach to financial planning and appreciating the varying levels of risk and reward that are involved. 

This is the coaching role of a good financial planner and the value that they can bring in terms of advising on the best strategies not for the short-term, but for the long-term results that you and your families are aiming for.

As the markets have again demonstrated during the last week, first with falls, followed by a rally and then further falls, there is no place for knee jerk reactions in sensible, well-balanced financial planning.

As the chart on my wall highlights, President Trump’s tariffs are the latest unfortunate bump in the road but, as before with other downturns, the markets will turn and there will be better days ahead again. 

Having different asset classes helps to shield financial portfolios from the worst but, whenever there is a storm, we all unfortunately get a little bit wet.

We will continue to track developments in the White House and the rest of the world and share further thoughts as the situation unfolds. In the meantime as ever, do please contact a member of the team if you would like to talk through anything with us.