You may have seen some headlines about new US tariffs — part of what’s being called ‘Liberation Day’ — and how markets have reacted. The news went further than expected, and global markets have responded negatively, at least in the short term.
What’s happened?
- European markets fell yesterday (Stoxx600 down 1.27%)
- US markets were closed, but futures showed declines (S&P 500 down 2.8%, NASDAQ down 3%)
- Bond prices rose, a sign that investors are moving to safer assets for now
What caused the reaction?
The US announced new tariffs on goods from various countries, including the EU. The minimum rate is 10%, but higher rates are being applied based on what the US claims are the “effective tariffs” those countries impose on American goods.
For example, the US says the EU imposes a 39% effective tariff — a figure economists widely dispute. The actual rate is likely closer to 3%. It’s unclear how the US arrived at its numbers.
What does this mean for your investments?
There’s still a lot we don’t know but what we do know is that markets often react strongly at first, but historically they settle as things become clearer. Right now:
- We may see some short-term volatility
- A 10% drop from recent highs is possible, after two strong years of growth
- Our diversified Multi-Asset portfolios are designed to reduce the impact of market shocks
For example, even if US stocks fall 3%, your portfolio — which includes a mix of asset types — is unlikely to fall by the same amount.
A reminder of the bigger picture
In the last five years, we’ve seen:
- A global pandemic
- Surging inflation and rising interest rates
- Wars in Europe and the Middle East
- Widespread political change
Despite all of that, markets have recovered and moved forward. We believe the same will happen again.
Stay focused on the long term
Short-term market drops are not losses unless you sell. The best approach — as always — is to stay focused on your long-term goals. We are monitoring the situation and will keep you informed.
This is an opportune time to revisit Zurich’s basic Principles of long term investment. This re-iterates that those investing for the medium to long-term should stick with their plan and helps guide our clients through today’s challenges and toward tomorrow’s goals and long-term investing .
If you have any questions or concerns, please don’t hesitate to get in touch with me or a member of my team.
