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Market volatility and your investments
On 2 April, President Trump announced his 'Liberation Day' tariffs - the taxes that will be charged on goods imported into the US from other countries. In response, stock markets around the world have seen significant falls in value.
We look at what's been happening and how you can best navigate through periods of market volatility like this.
Why have markets fallen?
Stock markets in the US and Europe had already been volatile following President Trump's earlier announcements on tariffs on goods imported from China, Canada and Mexico. However, the scale of the tariffs he announced on 2 April have caused additional and considerable shock waves in markets.
There's still uncertainty about the longer-term economic impact of these tariffs. But markets are currently reflecting concerns from investors about the prospect of trade wars, lower economic growth and potentially recession. There are concerns too that the tariffs could push up inflation around the world.
Added to that, uncertainty around taxes, deportations of undocumented workers and regulations, as well as President Trump's approach to foreign policy, may lead firms to hold back on investment decisions - further hurting the global economy.
What you can do in periods of market volatility
Take a long-term view
Although markets are currently particularly volatile and you may have seen the value of your investments fall, short-term ups and downs are part and parcel of investing. So, although you may be concerned, try to look at the longer-term picture.
History has shown that over the long term (generally more than 10 years), markets recover from downturns. So, if you can stay the course during periods of volatility and take a long-term view, for example if retirement is still some way off for you, you’re likely to see the value of your investments increase over time.
Of course, past performance isn’t a guide to future performance. The value of all investments can go down as well as up, and you could get back less than you paid in.
Don't make any hasty decisions
While you may be tempted to move out of falling investments, if you do, you’re not only locking in losses, you’re also potentially missing out on any recovery in the value of those investments. Continuing to make contributions into your pension investments is generally a good idea too. This is because market downturns give you the opportunity to buy more investments at a cheaper price.
Check if your investments are diversified
Periods of volatility in markets highlight the importance of spreading your money across different types of investments and geographical locations – known as diversification. Diversification can help reduce the amount of risk you take and potentially smooth out the returns you get on your investments, which in turn can help to lessen the impact of market volatility.
If your pension is invested in one of our Governed Range options – a Governed Portfolio, a Governed Retirement Income Portfolio or a lifestyle strategy – you’ll already be in a diversified investment option.
The Governed Range options are designed to navigate turbulent times like these by holding a range of different types of investments, including UK equities (stocks and shares), commodities and property. This diversified approach has played an important role in lessening the impact of risks, such as volatile markets, since the launch of the range in 2009.
Get professional advice
Changing your investments during periods of market volatility could have an impact on how much money you have in the future. So think about getting professional advice from a financial adviser before making any decisions. There’s likely to be a charge for their services, but they can help give you reassurance that you’re making the right decisions, both in the short and longer term.
If you don’t have an adviser, visit our Where to look for an adviser page.
Hear from our pensions expert
Worried about the impact of market falls on the value of your pension? Our pensions expert, Clare Moffat, explains why you shouldn't panic.
Video transcript
The first point when thinking about the ups and downs in the stock market is to try not to panic.
It's been an uncertain start to the year for stock markets for a variety of different reasons.
Now that's led to those ups and downs, and that in turn affects the value of investments and pension funds. And that can be really worrying for people.
Markets can move up and down quite sharply, but it's important to stay calm and avoid taking knee-jerk actions like stopping paying into your pension because that could mean you're affected by any losses. Because when stock markets fall your pension fund might be able to buy investments cheaper.
So actually, your pension contributions could go further.
It's really important to remember that pensions are long-term investments, and stock markets tend to recover over time.
Pensions are invested across shares, bonds, property, cash and other types of investments. And that can help to reduce the impact of volatility, that's those ups and downs over the long term.