March 2025 – Market update and the importance of Long-Term Investing
Market Overview
Once again, global financial markets are experiencing significant volatility. The U.S. stock market has seen sharp fluctuations, with both the S&P 500 and NASDAQ indices showing small declines in the last week. This instability is largely driven by geopolitical tensions, including renewed trade conflicts and economic policy shifts, however it is important to understand that much of this volatility is driven by a small number of ‘stocks’, (which make up an even smaller portion of our clients investments) and notwithstanding the immediate uncertainty caused by the new US administration, we have seen meaningful reductions in global inflation and an increase in consumer demands over the last 6-12 months.
Impact of President Trump’s Policies
Donald Trump’s announcement of 25% tariffs on imports from Mexico and Canada and 20% on China has added to market uncertainties. These tariffs are expected to impact various sectors, including manufacturing and agriculture, potentially leading to higher consumer prices and supply chain difficulties. This of course also gives the rest of the world some opportunity to restructure their own trade deals. Additionally, Trump’s decision to pause U.S. aid to Ukraine has further complicated international relations however, whether we agree with his methods or not, it is clear that he wants ‘peace’ both in Ukraine and the Middle East and if his ‘disruptive’ approach can secure a lasting cessation of these wars, it will save governments globally billions of pounds.
The Case for Long-Term Investing
In times of market turbulence, it’s crucial to remember the benefits of long-term investing and to remind yourself why you have money invested.
Warren Buffett said, “The only value of stock forecasters is to make fortune-tellers look good. The short-term direction of stock prices is close to random. But why? It all comes down to human psychology and the relationship between markets and volatility. Time in the market beats market timing every time”.
As advisers, Loughtons build and maintain portfolio’s for our clients from a range of primarily active (rather than passive) funds. We choose funds based on our clients ‘capacity for investment’ and attitude to risk’ and ensure a spread of investments both in terms of ‘equities, cash, fixed interest etc. but also geographically. We know that not all areas increase or decrease together, so diversification in itself reduces the risk posed by one individual area or asset class. We pick the fund managers to fill the portfolio’s based on the spread of assets as agreed and as appropriate, and we leave the fund managers to pick and choose the underlying investments. Their aim is to deliver performance that beats the fund’s stated benchmark or index and whilst ‘we’ as investors fear volatility, fund managers thrive on it, as it gives them opportunities to buy and sell and add value and increase the value of their funds.
Conclusion
Whilst current market conditions may seem daunting, it’s important to maintain a long-term perspective. By staying invested and focusing on your financial goals, you can navigate through volatility and work towards building a secure financial future.
For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email [email protected]
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Important Information
The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.
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