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US President Donald Trump’s aggressive stance on trade tariffs has threatened to spark a global trade war, and the strategy has paved the way for severe market crashes throughout Wall Street and beyond. 

The S&P 500 experienced its largest two-day decline in 75 years off the back of the chaos of Trump’s ‘Liberation Day’ tariffs, pushing investments lower overnight. 

Between Trump’s inauguration on the 20th of January, 2025 and the shock of the President’s tariff announcement reaching its lowest point on the 8th of April, the S&P 500 had shed more than 1,000 points for a 17.63% decline. 

For investors, such a sharp downturn is alarming, to say the least. To make matters worse, the widespread confusion surrounding the President’s announcements and eventual implementation of tariffs has led to widespread market volatility. 

Only the financial crash of 2008 has seen the Cboe Volatility Index, better known as VIX, climb above 50, but in early trading on Monday, 7th April, the index climbed above 60. 

President Trump appeared unmoved by the panic throughout global markets and even posted a message on social media on the 9th April: “THIS IS A GREAT TIME TO BUY!!! DJT”. Shortly after, Trump announced a 90-day pause on many of his sweeping tariffs in a move that saw a 9.5% recovery for the S&P 500. 

According to Mark Zandi, chief economist at Moody's Analytics, the United States could begin to feel the effects of a recession by June or July unless Trump can find an “off-ramp”. With tariffs on global trade paused, the world will be watching the President’s next moves over the coming weeks. 

For investors struggling with losses throughout their stocks and shares investments, it’s been an exceptionally challenging time. But what’s the best course of action to take? 
 

Don’t Panic

Crucially, it’s important to avoid panicking if you see that your portfolios are losing money. Historically speaking, investors who have opted to withdraw their portfolios on a downward trend lose out on their earnings potential in the long run. 

Dominic Pappalardo, chief multi-asset strategist for Morningstar Investment Management, suggests that many of the largest stock market bounces come in the wake of its biggest declines. The strategist claims that over the past 25 years, an investor who missed the best five days of market performance in the S&P 500 will have earned 36% less than an investor who held their positions throughout the entire period. 

We can also see the long-term resilience of stocks and shares among long-term ISA returns. Individual Savings Accounts that track stocks and shares have returned 9.64% annually over the past 10 years, even despite significant market crashes surrounding the pandemic in 2020. 

What’s more is that Stocks and Shares ISAs have consistently outperformed their Cash equivalents, which are heavily based on Bank of England interest rates, which have returned 1.21% on average over the same period. 

The long-term returns of Stocks and Shares ISAs suggest that investors can continue to grow their wealth over time despite short-term market downturns and volatility. Avoiding the temptation to panic and remembering to maintain a bigger picture mindset can help you to build your portfolio more effectively over time. 
 

Buy The Dip?

There’s a big difference between buying the dip and catching a falling knife, and Trump’s pause on tariffs could still delay the inevitable when it comes to navigating a recession. 

With tariffs remaining as high as 125% on trade with China, the prospect of buying discounted stocks still represents a risk, with the future remaining uncertain. 

Factors like trade uncertainty, worries over inflation, and future central bank policy pivots could all ensure that volatility continues to cloud investment options, according to Kate Leaman, chief market analyst at AvaTrade. 

This means that investors looking for short-term relief rallies may be best off adopting a more cautious approach. 
 

Diversification Remains Key

Although experts are grappling with the threat of a recession in the United States that would invariably impact global markets, diversifying your portfolio to incorporate more international holdings could be a strong option for resilience. 

While the S&P 500 has suffered historic losses in the face of Trump’s tariff announcements, the MSCI World Index slipped just 2.25% over the past year, showing that diversification can help to protect your assets against significant losses should the US slip into a recession. 

Stocks and shares investors worried about losses should spread money across different regions to mitigate the damage from market downturns, and looking further afield can bring plenty of benefits when avoiding losing out due to trade wars. 
 

Staying True to Your Goals

It’s always worth keeping your long-term financial goals in mind when it comes to navigating market downturns. The threat of a recession in the United States may be higher as a result of the President’s bold strategy on tariffs, but this doesn’t mean that you should be looking to cash in your chips. 

The long-term growth of the S&P 500 and other indexes shows a level of resilience that rewards those holding their portfolios for longer durations, and this points to the benefits of keeping calm and collected when facing the prospect of a recession. 

Keep your financial goals in mind at all times, and remember to ask yourself whether your actions could impact achieving your objectives. Recessions have become more frequent in the 21st Century, and markets have historically prevailed over the long term.

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