Perhaps President Trump has more of an eye on the verdict of economists, the international community and the markets than it might have seemed. The dealmaker-in-chief yesterday announced that his administration was stepping back from the worst excesses of his “reciprocal tariffs” policy, revealing a reshaped package:
- A 90-day pause to the additional, country-by-country “reciprocal tariffs”
- A continuation of the new 10% baseline tariff for all imports
- Another increase in the tariff on imports from China, up from 104% to 125% – due to the latter’s “lack of respect”
The market response to this news has been exuberant. Yesterday, America’s main stock market index, the S&P 500, rose by more than 9.5%. The Nasdaq Composite index, which focuses on technology companies, was up by more than 12%. Japan’s Nikkei 225 also put on over 9%. Today, at the time of writing on Thursday morning, the UK’s FTSE 100 is trading up by more than 4% and the German DAX by close to 6%.
Still, we are not yet completely out of the woods. As the leader of the opposition Democratic Party in the US Senate put it yesterday, we are living through “government by chaos” and further twists and turns could well be ahead.
Yet yesterday proved the importance of sticking with the markets when times get tough – because the best days often follow the worst days. This is a pattern that has often been seen throughout times of market volatility. Investors who panicked, sold their holdings and missed out on yesterday’s 9%+ gains are likely to be kicking themselves. Time in the market, not timing the market: yesterday provided a textbook example why.
Important information
Investors should be aware that the value of investments and the income from them may go down as well as up and neither is guaranteed. Investors could get back less than they invested. Past performance is not a reliable indicator of future results.
