Introduction

With Trump passing the milestone of his first 100 days in office and the first quarter earnings season (the period where publicly traded companies release their financial quarterly reports) nearing completion, now is a great time to take stock of what has been an interesting if turbulent start to the year. Volatility and uncertainty have been the key themes for global financial markets, in large part due to the unpredictable nature of the Trump administration and its policies. As the US is the largest global economy, its actions and impact are felt in the global markets The topic of tariffs is hotter than ever, with all eyes on what the next move will be.

Start

The year kicked off with a lot of optimism around the global economic outlook, however as the year has progressed the level of volatility has seen a sharp uptick as uncertainty abounded. The US has been one of the main contributors to this. Despite seeing a positive market response to Trump’s inauguration, the announcement of a series of tariffs took the market by surprise and prompted a reversal of previous optimism and saw a decline in markets¹. Additionally, the first quarter of 2025 saw the first drop in the US economy in 3 years, with real GDP (USD) shrinking at an annualised rate of -0.3%.²

With doom and gloom permeating the headlines it is easy to get lost in the noise, however remaining calm and staying the course has never been more important. Weathering the storm is critical, as with any period of market volatility, the dust will settle and those that held their nerve will likely benefit the most. Additionally, it is always good to keep in mind that where there is uncertainty, there is also opportunity.

Historic Context

Looking to the past to make sense of the present is a long-held tradition during times of turmoil. Although each period of financial uncertainty is somewhat unique, there are still lessons to be learned from previous periods of market uncertainty.

For the most direct comparison to the current Trump administration, we must look back almost a hundred years to the 1930s when President Herbert Hoover raised tariffs almost 20%, subsequently worsening the Great Depression. This was the last time that a President of the United States has implemented a programme of tariffs of a similar magnitude (including the previous Trump administration).

For more recent examples, we can look at the early 2000s Technology Bubble, the Global Financial Crisis and the Covid-19 epidemic. The tech crash at the start of the 2000s was the result of investors driving up share prices of companies that had no legitimate revenue streams. During the Global Financial Crisis of 2008 the banks were responsible for driving up the price of an asset (sub-prime mortgages) to unrealistic levels. Hindsight is 20-20 and it is easy to look back at these two crashes and see all the warning signs that were missed by most. However, the Covid-19 epidemic was a true exogenous shock that took the world by surprise, leaving investors unprepared.

This time, the circumstances are very different. The uncertainty and volatility are being caused by a specific leader (Trump) in charge of the leading global economy (the United States) and whose policies remain both unpredictable and impactful.

Looking through the noise to what is actually going on

As ever in times of uncertainty, it is better to take a step back and take stock of the bigger picture. This is not a moment to panic! Looking through the headlines to the finer details, paints a bit of a different picture.

After seeing the US GDP growth decline in the first quarter, increased attention was placed on the IMF April growth projections for global GDP. There was some disappointment upon seeing them downgrade their projections for 2025 and 2026 (as compared to their October projections). However, looking at their five year forecast, the global outlook remains broadly static seeing only a slight shift from 3.2% to 3.1%, with a similarly small shift seen across major geographies:

What’s key to see here is that although the next few years have seen a decline in growth forecasts, the longer-term outlook remains positive with a those few years of slightly weaker growth waylaying for a return to growth.

Although we saw something of a reversal of fortunes in the financial markets from the more positive outlook at the end of last year, the moves may still be an overreaction. Looking at the US earnings season, we are now more than two thirds of the way through and the results have been strong and ahead of expectations³. Reported earnings numbers have positively surprised investors, with the average reported earnings with companies in the Health Care, Communication Services and Information Technology spaces seeing the largest growth year-on-year.

Beyond the headlines: long-term investment horizons time to shine

The benefits of a long-term investment horizon shine in times like these. While the gut reaction may be to panic in the face of catastrophising headlines, the classic Britishism of “Keep Calm and Carry On” feels apt here. Keeping your composure and staying the course is critical: now is not the moment to panic!

As seen through the IMF numbers, the long-term outlook for economic growth remains healthy. Looking at the companies that have reported so far, the uncertainty overhang is clearly weighing on anyone’s ability to forecast exactly when the tides will turn and there have been some downgrade to outlooks for the next two years (of S&P 500 companies that have reported so far, earnings growth guidance for calendar year 2025 and 2026 has decreased slightly but remained positive⁴, the message has remained broadly upbeat on the longer term outlook. The expectation remains that growth and stability will return, the question is more about when.⁵

Another thing to remember with an environment like this is that part of the volatility markets are exhibiting is due to the uncertainty of the outcome, meaning that a negative outcome is by no means locked in. A policy turnaround is not out of the question.

Whilst the patient approach may not be the most exciting, the phrase to keep in mind is “time in the markets not timing the markets”: your long-term investment horizon is one of your best assets in periods of instability.

Another key element to managing volatile environments is diversification, which earns its title of “the only free lunch in investment” during times like this and remains a cornerstone of risk management. There are always areas of the market where current difficulties will be a benefit. Low volatility and more defensive parts of the market such as consumer staples, bonds, have often performed better and may offer some balance at times like these. Having a more diversified portfolio is a great tool to offer some protection as it spreads the risk across different investment types, limiting your exposure to any one threat.

Conclusion

In times like these, it can be difficult to find your bearings. Whilst no one can say with any certainty what the outcome of the current state of affairs will be, that is a cornerstone of investing. But past experiences have taught us that whilst staying invested at times like these can be scary and feel like the hardest choice, in most cases it’s the right choice. And of course if you are worried or want to review your own position, taking expert advice and speaking with a financial planner can help to ensure that your investment strategy aligns with your overall financial goals. Overall, this is a good time to take a deep breath, a step back and keep calm and carry on.

The information in this article should not be regarded as financial advice. Information is based on our understanding in May 2025. Investment growth isn’t guaranteed and it’s possible that you could get back less than you paid in. Aberdeen is not responsible for the information, accuracy and views of external sources.