Taking the long view in turbulent times

9th April 2025

In the wake of recent market volatility, Matt Brennan, Head of Asset Allocation, takes a look at what’s happening and what it means for investors. 

The past few weeks have been alive with speculation about what tariffs the US might bring in and who and what would be targeted. That speculation came to an end in early April when the new US administration announced a sweeping range of tariffs on so-called ‘Liberation Day’.

The tariffs were unprecedented in their scale, targeting large and small countries, and both developed and emerging markets. They range from a general 10% upwards, with some countries facing significantly higher.

The announcement led to volatility across a range of different asset classes as investors sought to calculate their impact, but also the potential for retaliatory tariffs from the countries affected. This has led to sharp moves in financial markets and a number of often-inflammatory media headlines. Global equity markets have fallen and shares in the US were particularly hard hit, especially shares in companies with manufacturing or supply hubs located in countries facing the highest tariffs. Bonds were also affected, with government bond yields falling and prices rising as investors turned to what are traditionally considered ‘safe haven’ investments. 

While markets continue to absorb the effect of these tariffs and any retaliatory moves, and consider what it means for future global trade, this uncertainty could continue. We know, for example, that the Liberation Day tariffs announced by President Trump exceeded the campaign promises he made, so there is potential headroom for negotiation, and we have also heard that several nations are keen to get around the table. Of course, others have announced more aggressive responses.  

In their current form, the size and range of these tariffs has the potential to disrupt global trade flows. This could dampen economic growth and have an inflationary effect, issues acknowledged by the Chair of the Federal Reserve, the US central bank, just days after the announcement. What we don’t yet know is how central banks will respond to this in terms of their policy, for example, whether the threat of higher inflation will lead to a more cautious approach to intended interest rate cuts or how actual inflation increases or slowing economic growth might be managed. 

While the kind of uncertainty around trade, inflation, interest rates and economic growth clearly unsettles markets, we know it can be unsettling for those investing in a pension too. The important thing is that pension investors don’t panic and make rash decisions. Pensions have two key characteristics that it’s important to remember – they are invested for the long term, and they are typically well-diversified. For members at or approaching retirement, derisking, or moving funds into lower risk investments, can help to dampen the effects of volatility.

Experience and history tell us that volatility like this is typically short lived, and markets generally recover. As long-term investors, we’re particularly interested in cutting through the market noise surrounding this initial reaction and volatility and understanding how these tariffs might change the structure of the global economy in the long term. Key to that is recognising that the imposition of tariffs isn’t a single one-off event, but one that will continue to be felt at a micro- and macro-economic level.

By continuing to closely monitor and analyse market reaction and economic indicators we will be in a position to support investors as we all navigate what’s happening now to help achieve good retirement outcomes in the long term.