Global financial markets have suffered a bruising few weeks.
At the time of writing, the US benchmark S&P 500 index has fallen 8% year-to-date and stands 12% below its all-time high achieved just seven weeks ago(!!). Meanwhile, the tech-heavy Nasdaq index has plummeted 17.5% – officially entering 'correction' territory.
What's behind the sell-off?
The trigger is well-understood: Donald Trump's announcement of wide-ranging global tariffs, far more punitive than market participants had initially expected.
During his first term, Trump appeared relatively sensitive to stock market performance, often backing down from more aggressive trade measures when markets reacted negatively—the so-called ‘Trump put’. This time around, the administration seems less concerned about market sentiment.
Adding fuel to the fire, the tech sector—especially in the US—has been under added pressure. Earlier this year, there was widespread confidence that American firms would always dominate in technology and innovation. But as The Economist recently highlighted, new competition from China—such as AI firm DeepSeek, with its compelling and affordable reasoning model—is beginning to challenge that dominance. While the US may still lead in terms of pure capability, a more even playing field could weigh on the sky-high valuations of US tech giants.[1]
The urge to 'do something'
During such bouts of volatility, it's entirely human to feel an urge to take action. To reposition the portfolio. To sell everything and move to cash. To abandon US equities in favour of Europe. To 'buy the dip'. Do something. Do anything!
Yet this is rarely the right approach.
Market pullbacks of 10–15% are surprisingly normal, happening about once a year. Just looking at the S&P 500 alone, the average year sees a decline of 14% at some point[2]. More significant drops of around 20–30% tend to come around every 4–5 years. We’ve not had one of those in a while, so what we’re seeing now, while uncomfortable, is well within the bounds of ‘normal’.
And as tempting as it is, the truth is that no one can reliably predict what happens next. Yes, market sentiment feels extremely fragile at present, and the threat of retaliatory tariffs could push things ever lower. But it’s equally plausible that rhetoric softens or reverses entirely—and markets rebound just as quickly as they fell.
Moreover, if you sell now, when do you get back in? When things feel calm again—i.e. when prices have recovered?
Fortunately, despite the fact that regular intra-year declines are a common feature, global equity markets have still delivered significant and consistent long-term returns.
“Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.” – Peter Lynch.
That being said, we also recognise that these kinds of reminders—about average declines and ‘time in the market’—rarely feel reassuring in the moment. When your portfolio is falling, and the headlines are screaming doom, every sell-off feels horrendous. Every downturn feels like this time may well be different.
What we're doing
So instead of trotting out more statistics or history lessons, we thought it might be more helpful to simply share what we’re doing in portfolios right now:
- Staying disciplined – We continue to advocate a low-cost, globally diversified, factor-based investment approach. This naturally tilts toward smaller companies, value stocks, and profitable businesses—which are less exposed to the tech giants currently driving much of the market’s decline. This has driven some modest outperformance over recent weeks. Although, let’s be frank - outperforming in falling markets still feels rather hollow. It’s still a loss, just a slightly smaller one.
- Letting rebalancing do the work – Portfolios will be rebalanced once their allocations drift too far from the target. In practical terms, this provides a systematic ‘buy low, sell high’ mechanism. We’ve written about this in a previous blog[3].
- Protecting retirees – For clients drawing income, we’ve already factored volatility into your financial plans. We typically hold a cash buffer to avoid having to sell down investments at an inopportune time and have consistently used conservative return assumptions in cashflow projections, which incorporate such periods of market weakness.
- Being strategic with new investments – Where clients have new money to invest, we’re often phasing it in: deploying half now and the remainder over the next 6–8 months. This provides immediate ‘skin in the game’ should markets recover while keeping some ‘dry powder’ should they remain under pressure.
We're here for you
Most importantly, we've built your financial plan with conservative assumptions and portfolio diversification. Market volatility was always part of the equation.
However, I understand that seeing these market moves can be unsettling. If you'd like to discuss your specific situation, revisit your cashflow modelling, or simply talk through any concerns, my door is always open.
Sometimes the most valuable aspect of financial planning isn't the technical expertise – it's having someone to talk to during uncertain times.
Kind regards,
George
