At the end of last year, FTAdviser reported that Donald Trump’s imminent return to the White House had “shifted the economic outlook for 2025 meaningfully”. Since then, the impact of his opening two months in office has arguably been even greater than anticipated. So much so that, among upended alliances, tit-for-tat trade wars, and unseemly press conferences, it has been hard to keep up at times. But keep up we will.
At Jane Smith Financial planning, monitoring global markets and economic forecasts is part of the behind-the-scenes work we do on a daily basis. You can discover more about this and why tracking your pension (and your steps) is the easy part, in our recent blog.
In the meantime, though, keep reading for a look at the potential effect of the Trump presidency on US and global markets over the next four years and what his decisions might mean (if anything) for your long-term financial plans.
Trade tariffs and recession fears have caused uncertainty in US markets
In his 5 March speech to Congress, President Trump spoke of his desire to usher in a golden age for America. Alongside mass firings of federal workers and the shutting down of government departments to save money, he has also overseen a 25% tariff on goods from Mexico and Canada and doubled the levy he introduced on Chinese products, which now stands at 20%.
Most recently (at time of writing), Trump has placed a 25% on all steel and aluminium imports “with no exceptions or exemptions”.
These tariffs, and the retaliation that follows, will affect US and world markets. Speaking to Fox News on 9 March (as reported by the Guardian) and asked about a possible recession, Trump answered that he “hates to predict these things”. In Wall Street, US markets duly plummeted.
While early reaction to Trump’s win was positive, markets downturned when his promised tariffs became a reality, with connected fears of higher inflation exacerbated by labour shortages amid tighter immigration controls. According to Sky News, the initial positive sentiment has all but vanished, turning the so-called “Trump bump” into a “Trump slump”.
Outside of the US, market reaction to Trump’s second term has been understandably cautious. And while economic forecasts are notoriously hard to make, uncertainty looks set to be a trend for 2025.
But this doesn’t necessarily spell bad news for your long-term investments.
Short-term uncertainty is to be expected so stay calm and patient
Markets fluctuate constantly and periods of short-term volatility are an inherent part of investing. This is the reason why the investments you hold are long term. It allows your wealth the time to recover from short-term dips while keeping you on track to your goals. And despite periods of volatility, whatever their cause, markets generally trend upwards.
Here’s a look at the S&P 500 going back to the outbreak of the second world war.
Source: Macrotrends
This period also includes the assassination of JFK, the Vietnam War, and 9/11, as well as 15 different presidents, and more recently, the Covid pandemic. And yet the upward trend is clear.
Here, CNN outlines the effect on the S&P 500 of each president from Ronald Regan to Donald Trump, ending with the latter’s first term.
Source: CNN
Again, aside from George W Bush – who oversaw the Iraq War in response to 9/11 – markets have generally risen.
But what does that mean for your investments? Here are three points to consider.
1. Stay calm and ignore the noise
Keeping up with global events in the current climate will undoubtedly mean reading headlines about Donald Trump. From the continuing situation in Gaza and Russia’s invasion of Ukraine to escalating trade wars and worrying bid to “get” Greenland “one way or the other”, the US president has placed himself at the centre of world politics.
Global conflicts, trade tariffs, and US domestic policy will all affect global markets in the short term but, ultimately, are unlikely to disrupt markets’ direction of travel over the long term.
Armed with this knowledge, the most advisable course of action is to stay calm and ignore the noise. Remember that knee-jerk reactions when markets fall turn paper losses into real ones, so patience is key. Stay the course and your money will be there to benefit when markets rise again.
2. Remember that your portfolio is diversified
Your investment portfolio is aligned to your long-term goals, and your attitude to risk. As part of our strategy to spread this risk, your investment is diversified across asset classes, geographical regions and sectors. If one area drops, it is hoped that this will be counterweighted by a rise elsewhere.
As global events and policies affect different areas, we’ll regularly review your portfolio to ensure it always aligns with your risk profile. And if your allocation needs rebalancing, we’ll be there to advise you.
3. Remain focused on your goals
World leaders come and go and global uncertainty is likely to remain, at least in the short term. But if your long-term financial goals haven’t changed then it’s unlikely your plan will need to.
That said, life events can alter your priorities and tweaks might be needed. Annual reviews mean we’re always on hand to talk through the impact of potential changes so be sure to get in touch if you’d like to discuss a potential amendment.
Get in touch
If you’re looking for an independent financial adviser in Milton Keynes or Olney, we can offer reassurance and help you navigate through a constantly shifting world, so look no further. At Jane Smith Financial Planning, we’ve been helping clients for 30 years, so contact us at info@janesmithfinancial.com or call 01234 713131 to see what we can do for you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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