3 Credit:Monkey Business Images/Shutterstock.com INVESTMENT ast performance is not a guide to the future." Those words are probably familiar enough from investment articles and advertisements but are unlikely to have prepared you for the ‘performance’ that followed Donald Trump’s ‘Liberation Day’ tariff announcement. He made his big rate reveal in the White House Rose Garden after the US stock market had closed on 2 April. The left-hand side of the graph shows US investors’ immediate reaction, which can only be described as a cliff-edge fall, as measured by the professionals’ preferred market index, the S&P 500. While there had been widespread speculation about the tariffs’ levels and targets, what Trump delivered blind-sided everyone. Tariffs were imposed on islands inhabited only by penguins and the top tariff (50%) was applied to Lesotho, a small, impoverished African diamond exporter which, unsurprisingly, has little appetite for US imports. A DOMINO EFFECT Most other major stock markets reacted with similar sharp drops. For example, the FTSE 100 fell 10.5% from the end of March to 9 April. That day, a week after the Rose Garden shock, proved to be the turning point as it coincided with a fresh Trump announcement – after UK markets closed – that most tariffs would be suspended for 90 days (to 8 July), albeit with a baseline tariff of 10% staying in place. The relatively quick U-turn was interpreted as cold feet and second thoughts, or clever manoeuvring, depending on who you listened to. Markets rebounded on the turnaround news because the ‘pause’ was interpreted as an end to high tariffs. This optimism was reinforced when, in mid-May, the US and China agreed a mutual 90-day reduction of 115% in the blockade level of tariffs they were applying to each other. The result was the US (and other) stock markets climbing back above the levels reached immediately before the initial tariff announcement. It was almost as if the six weeks of rollercoaster ride had never happened. TAKING THE LONG VIEW Look again at that graph and it is easy to see now how quick and large profits could have been made by selling at the start of April and then buying back a little over a week later. However, such wisdom is purely hypothetical as nobody knew how the tariffs would play out. A more likely outcome is the panicked investor who sold out after the Rose Garden announcement and got stuck holding cash as the market rebounded. That is a major – and long-standing – lesson of the Trump tariff saga: timing the investment markets, whether buying or selling, is next to impossible without hindsight. Another familiar lesson is, to use a well-worn phrase, don’t panic. Markets have a habit of over-reacting in both directions. A third lesson is to remember investment is about the long term – not just one month, however dramatic. ✣ The value of your investment and any income from it 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. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. Investment markets had a wild ride after Trump’s tariff announcements. Amidst the turmoil there were lessons to be learned. “P The lessons of ‘Liberation Day’ Credit: Porstocker/Shutterstock.com THE S&P 500 FROM THE START OF APRIL 31/3/25 7/4/25 14/4/25 21/4/25 28/4/25 5/5/25 12/5/25 5,900 5,800 5,700 5,600 5,500 5,400 5,300 5,200 5,100 5,000 4,900 Source Investing.com
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