Recent market volatility caused by the introduction of 'Liberation Day' tariffs has understandably heightened anxiety among investors, who see their portfolio values declining sharply and fear continued losses. However, historical data provides crucial context and reassurance: every major market crash in history - from the 1929 Great Depression to Black Monday in 1987, the bursting of the Dotcom Bubble in 2000, the Global Financial Crisis in 2008, Brexit uncertainty in 2016, and the COVID-19 market crash in 2020 - has eventually been followed by a complete recovery and subsequent growth. This consistent historical pattern underscores the resilience and cyclical nature of markets.
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Source: Kaplan et al. (2009); Ibbotson (2023); Morningstar Direct; Goetzmann, Ibbotson, and Peng (2000); Pierce (1982); www.econ.yale.edu/^shiller/data.htm, Ibbotson Associated SBBI US Large-Cap Stock Inflation Adjusted Total Return Extended Index, S&P 500 (2025), Bureau of Labor Statistics, Non-Seasonally Adjusted Consumer Price Index (2025). Data as of Feb. 28, 2025.
The chart illustrates that following every significant market crash in history, markets have consistently rebounded and expanded.
History Offers a Clear Lesson: Ignore the Noise and Avoid Costly Mistakes
Periods of market stress tend to follow a familiar pattern. Sharp declines in value prompt fear, and fear drives behaviour that often harms long-term outcomes. But time and again, history has shown that those who remain calm and focused during market downturns are best positioned to benefit from the recovery that inevitably follows. Understanding common behavioural pitfalls is key to protecting capital and ensuring investment success.
Mistake 1: Move Your Portfolio Into Cash
When markets decline sharply, a proportion of investors react by shifting their investments into cash, driven by the understandable desire to prevent further losses. Of course, every investor’s situation and objectives are different, but for most, moving into cash during a market downturn is the wrong decision. An attempt to limit further losses is a natural response to fear, but it typically does more harm than good. Converting investments to cash during periods of market decline locks in the losses already experienced and removes any opportunity to participate in the recovery that often follows.
Historically, markets recover before economic sentiment improves, and the strongest gains tend to occur during the early stages of that rebound. Investors who exit the market risk missing these critical periods. Over time, remaining invested - even through uncomfortable downturns - has consistently proven to be a more effective strategy for preserving and growing capital.
Mistake 2: Panic Move To A New Provider
Another common reaction to falling markets is to blame current advisers or investment providers and seek alternative advisers, thinking that performance might improve elsewhere. This move is rarely advantageous, as downturns typically affect all providers similarly. Switching providers during market volatility often results in additional transaction fees, platform costs, and potential tax implications, ultimately exacerbating rather than alleviating financial strain.
If you were concerned about your portfolio's performance prior to the recent market decline, exploring alternative options that might be more efficient and aligned with your goals could be advantageous. Additionally, if your portfolio is heavily weighted in U.S. and technology stocks, as is common, we suggest scheduling a no-obligation call with a Yodelar Adviser.
What Are the Economic and Market Implications of "Liberation Day" Tariffs?
The Liberation Day tariffs mark more than just a change in policy - they represent a major shift towards economic nationalism that could seriously affect global trade. The new system introduces two types of tariffs: a standard 10% rate on all imports and a higher “reciprocal” tariff for certain countries, calculated based on how much they export to the US compared to what they import. This structure signals a move away from global cooperation and towards more confrontational trade tactics. It’s also the highest set of tariffs seen since the 1930s, and markets are already reacting negatively.
The most controversial part is the reciprocal tariff. Unlike traditional tariffs based on specific trade disputes, these are politically motivated and calculated using a basic and inconsistent formula. For example, China faces a 34% tariff - not because it imposes high tariffs on the US, but because it runs a large trade surplus. The UK faces only the 10% baseline due to a smaller surplus. This approach adds uncertainty and makes future US trade decisions harder to predict.
These changes have alarmed international investors and trade partners, who worry they could trigger retaliation, increase trade tensions, and slow global economic growth. The staggered start dates - April 5th for the base tariff and April 9th for the reciprocal rates - suggest there may still be room for negotiation. However, the market reaction indicates that much of the damage to investor confidence has already been done.
Markets dislike unpredictability, and these measures have created plenty of it. Investors now face a more volatile environment, especially as the long-term direction of trade and economic policy becomes less certain.
Short-Term Outlook and Market Risks
The immediate economic impact is likely to be negative: Tariffs work like a tax on trade. They reduce demand, increase the cost of goods, and can drive up inflation. As a result, markets are now pricing in slower US growth and a higher chance of recession.
Normally, weaker growth would lead central banks to lower interest rates. The Federal Reserve has already shown it is willing to support growth, and current bond market movements suggest more rate cuts could follow this year.
There is also a broader risk to confidence in US assets. Overseas investors hold over $33 trillion in US investments. If trust in the US as a reliable trading partner weakens, we could see a move away from US assets - and potentially, a challenge to the US dollar’s role as the world’s reserve currency.
Portfolio Positioning and Strategic Discipline
In times of heightened volatility, portfolios with less exposure to concentrated markets - such as US equities or the technology sector - may experience less severe short-term impacts. However, in a global sell-off, few investors are fully insulated from broader market pressures.
The key to navigating such uncertainty is to remain grounded. Reactionary decisions driven by headlines or political narratives can often lead to costly mistakes. The label "Liberation Day" may have been crafted for political theatre, but effective investment strategy requires clear thinking and restraint.
Despite the unsettling headlines, the core principles of successful investing remain unchanged. Diversification, long-term perspective, and a focus on real, sustainable value continue to offer the best chance of weathering volatility and achieving enduring financial success.
While the short-term noise is unsettling, the principles of successful investing have not changed. Diversification, patience, and a focus on underlying value remain essential.
As of Friday at noon, China has announced a 34% reciprocal tariff on US imports, prompting another market decline. We expect other countries to respond in due course, and we’ll continue to track each development. But we will not react emotionally. The term “Liberation Day” may have been chosen for political impact, but true investment success lies in staying rational and avoiding knee-jerk decisions.
Summary and Conclusion: Discipline Over Reaction
While the recent market volatility triggered by the 'Liberation Day' tariffs has understandably raised concerns, historical evidence strongly suggests that such downturns are temporary and inevitably followed by periods of recovery and growth. Investors face critical choices in turbulent times, and common reactions - such as moving to cash or switching providers - often lead to unnecessary financial losses and missed opportunities for recovery. However, as touched upon in this article, there are scenarios where investors should speak to an independent adviser to discuss potentially more efficient investment solutions.
The tariffs themselves introduce uncertainty into global trade and economic conditions, with potentially significant implications for growth, inflation, and asset confidence. Despite this uncertainty, the foundational principles of successful investing remain unchanged: disciplined diversification, long-term perspective, and patience.
Ultimately, history has shown consistently that disciplined investors who avoid impulsive decisions during periods of market stress are rewarded over time. Maintaining focus on long-term objectives rather than reacting to short-term market noise remains the most effective strategy for navigating current uncertainties and achieving sustained financial success.
