In the video above, I provide an update on recent market volatility caused by geopolitical tensions, particularly trade wars instigated by former U.S. President Donald Trump, including tariff disputes with China and other nations. While markets initially fell sharply, they have since started to recover. Despite the recent ups and downs, the overarching advice remains consistent: stay invested.
The global stock market, as measured by the MSCI World Index, dropped around 18% from its peak but has since recovered slightly, remaining about 14–15% down at the time of the update. I emphasise that these declines primarily represent the loss of gains accumulated over the previous year, with markets still showing significant growth over a two-year timespan. Therefore, short-term drops should be viewed in the broader context of long-term performance.
Client portfolios, particularly those with risk levels between 5 and 8, have seen temporary declines between 6–10%, but still remain in positive territory when viewed over a one- or two-year period. I caution against panicking and shifting investments into cash, arguing that long-term returns from investment markets vastly outperform cash holdings. Data over 5, 20, and even 50 years demonstrates that staying invested yields much better outcomes compared to holding cash, even when accounting for short-term market dips.
Two alternatives to staying invested are discussed: moving into cash permanently or attempting to time the market by selling before downturns and re-entering at market lows. Both strategies are criticized. Holding cash long-term fails to provide meaningful returns, especially when compared to market investments. Market timing is described as extremely difficult and often counterproductive, as investors tend to miss recoveries by exiting too late and re-entering too late. Examples include the dot-com bubble, the 2008 financial crash, and the COVID-19 market drop in 2020—periods where staying invested proved to be the better strategy.
I also address investor concerns around needing access to capital during market downturns. Portfolios are structured to include short-term bond funds, which are more stable and have shown strong performance (up nearly 10% over the last two years). These serve as a buffer, allowing investors to draw from less volatile assets without having to sell equities at a loss.
Ultimately, I reassure clients that despite market volatility, history shows consistent recovery following downturns. All market crashes, including those during the dot-com era, the financial crisis, and COVID-19, were followed by eventual rebounds. Therefore, the recommended strategy remains to stay invested, avoid emotional reactions to market drops, and rely on well-diversified portfolios that are structured with risk and income needs in mind.
I conclude by encouraging clients with questions or concerns to reach out for personalised guidance. If you do have any further worries, we would be more than happy to discuss them with you. Please get on touch with us on 0114 262 1943 or info@fyfefinancial.co.uk to arrange a call.
Richard Fyfe
Director & Chartered Financial Planner at Fyfe Financial
Please note that the article above, including the embedded video presentation, does not constitute financial advice nor a personal recommendation. The value of your investment is not guaranteed, and unit prices can fall as well as rise. Information on past performance, where given, cannot be relied upon as a guide to future performance. For any investment you make, you may get back less than you invested.
