How to stay calm in the face of market volatility

It’s pretty safe to say that the first half of 2025 has been “interesting” in terms of global markets.

Starting off his second term, President Trump made good on his promise to impose trade tariffs on all imports. Initially set at 10%, these were then increased for imports from specific countries.

The global markets reacted accordingly (and predictably), with significant volatility and uncertainty following.

The president then made further announcements, pauses, and changes, implementing new tariffs over the subsequent weeks and sending more ripples across the markets each time.

But after the storm comes the calm. And the same is true for the markets. Volatility happens, uncertainty happens, recovery happens.

Here’s why market volatility is actually the norm, and how keeping a cool head is generally the most sensible path for investors.

Market volatility is common and history tells us that doing nothing is often the right course of action

Reading or hearing about market volatility can be disconcerting for investors. And if the news is constantly blaring about how awful everything is, it can be difficult to keep a sense of perspective.

Worry and anxiety can then creep in, as you start to wonder how safe your investments and pensions are.

This is perfectly natural. But it’s important to remember that volatility is nothing new. We’ve seen this type of unrest many, many times before.

Cast your mind back to 2008, for example, when the global economic crisis unfolded, sending shockwaves across international markets. Looking back further, in 1929, the Great Depression began in the US following the stock market crash, with widespread impact across the rest of the world.

But, historically, markets recover. And pretty quickly. Data from CNBC shows that the day after President Trump’s tariff reversal announcement, the S&P 500 showed the third-biggest one-day gain since the second world war.

Invested wealth has been shown to outperform cash over the long term

While it can be tempting to cash in your investments during these times, the most sensible course of action is generally to do nothing and simply wait for the markets to recover.

Of course, there are never hard-and-fast guarantees when it comes to investments, and we can’t always rely on past performance as an indicator of what’s to come. However, we do know that inflation can affect the real value of cash.

And when we look at some of the data from previous times of economic volatility, staying invested would always have been the more profitable decision in the long term, compared to switching to cash.

Research from Schroders uses 100 years of data from the US stock market.

It shows that investors opting for cash after a 25% decline during the 2008 financial crisis would still be recovering today, while staying invested would have seen recovery by 2013, just five years later.

Moving to the present day, in April 2025 after the tariff announcements, Reuters found that the S&P 500 Index had closed at its lowest point in almost a year, losing $5.83 trillion in market value. Just three months later, a separate report from Reuters showed it had closed at a record high.

Proactively navigate volatile markets with diversification and a strong financial plan

Volatility is so common in the markets that it even has its own “fear gauge”, known as the “VIX” volatility index. This measures how much volatility traders expect over the coming 30 days.

According to City A.M., following President Trump’s initial tariff announcements, the VIX had climbed to 60, the highest levels since the early days of the pandemic lockdowns in 2020. For context, anything above 30 is associated with extreme volatility.

The latest VIX level is at a much steadier 17.07 (17 July 2025).

Knowing markets are volatile is only half the battle, of course. The other element is putting measures in place that ensure your portfolio is able to withstand such periods.

Diversification – spreading your investments across a wide range of assets – can be an effective tool to protect your investments against market turmoil. Although you will often recover your losses once markets rally, having a broad range of investments across a wider range of markets, regions, sectors, and asset classes can give you some reassurance.

That way, if one portion of your portfolio dips, these losses might be offset by gains elsewhere. You might also generate greater gains overall in the long term.

Recovery can take some time, however, and it’s not really a good idea to check your investment values every day, as this can be disheartening. Although media hysteria can be worrying, you’re more likely to lose your nerve if your investments aren’t rallying quickly.

Generally, you invest for the long term, so leaving your investments to ride the storm of the markets is all part and parcel of this. You’ll feel much calmer if you avoid giving too much attention to each daily change.

This is where talking to a financial adviser and having a comprehensive financial plan can help. A strong plan will give you peace of mind during volatile times, knowing you have a well-diversified portfolio that balances risk in line with your preferred approach.

Crucially, you’ll know that your investments are aligned with your wider financial plan, including what your goals are for the short, medium, and long term. So, no matter what happens in the market, you can ensure that you remain on track to achieving your targets.

Get in touch

If you’d like to talk to us about creating a financial plan, developing your existing one, or would simply like some reassurance in turbulent times, we’re always here to help. Email us at info@andersonfinancialltd.com or call us on 020 8943 0065.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.