Why long-term thinking wins big in a tough market

The purpose of this blog is to provide you with clarity amid the recent turbulence in global markets, triggered by the US administration’s actions. These market shifts affect not only businesses and trade but also have a direct impact on your personal financial landscape, from pensions to mortgages, inflation to taxes. The secret to navigating this uncertainty and emerging stronger lies in maintaining a long-term perspective. Rather than reacting impulsively, it’s about sticking to a strategy grounded in diversification, smart planning, and patience. Let’s explore what’s happening and how you can position yourself for long-term success.

What does this mean for your investments?

There’s no sugar-coating, global markets took a hit in response to the tariffs. But if you’re investing for the long term, market volatility isn’t something to fear, it’s something to expect.

That’s why the timeless investing principles of time in the market and diversification matter more than ever.

Trying to time the market, buying low and selling high with perfect precision, is extremely difficult, even for professionals. Instead, history shows that staying invested through market ups and downs gives you a much better chance of long-term success. Missing just a few of the market’s best days can significantly reduce returns.

Just as important is diversification. Spreading your investments across regions, industries, and asset types helps cushion your portfolio against shocks in any one area. It’s your best defence against the unexpected and trade tariffs certainly count as that.

Pensions and retirement planning: Stay the course

For pension investors, the recent volatility may feel unsettling. But reacting impulsively by cutting contributions or changing strategy could lock in losses and harm your future retirement income.

If you’re nearing retirement, it might be wise to delay taking income via drawdown until markets stabilise. Alternatively, more people may consider annuities, especially while rates remain attractive. Right now, a 65-year-old with a £100,000 pension could secure up to £7,685 a year from a level annuity with a five-year guarantee.

Just remember annuities are usually fixed for life, so it’s crucial to weigh all options before committing.

If you’re already in retirement using drawdown, consider a natural yield approach—only withdrawing income generated by your investments. And to weather short-term storms, hold one to three years’ worth of essential expenses in an easy-access account.

Inflation, mortgages, and taxes: The uncertain road ahead

It’s tough to predict how tariffs will ultimately affect inflation. On one hand, companies may raise prices to offset higher costs. On the other, we might see price wars as firms compete for access to the US market or UK consumers could benefit from surplus goods diverted from the US.

This inflation uncertainty complicates things for the Bank of England. For now, markets expect further interest rate cuts to support economic growth, which could be good news for borrowers.

What about mortgages? If you’re due to remortgage, it’s worth locking in a deal early. Rates may fall further but if they rise, you’ll be glad you secured a lower rate now.

Could taxes go up? If growth slows due to global uncertainty, the government may be forced to find ways to raise revenue especially come Autumn Budget season. That’s why now is a great time to take advantage of existing tax wrappers like ISAs and pensions, which can help protect more of your money from future tax changes.

Key takeaways

• Time in the market beats timing the market – Staying invested long term is more effective than trying to predict market highs and lows.
• Diversification is your safety net – Spreading investments across sectors and regions helps manage risk and reduce volatility.
• Don’t panic about pensions – Avoid knee-jerk reactions like stopping contributions or switching strategy during turbulence.
• Inflation, mortgages, and taxes may all be impacted – Tariffs introduce uncertainty, so locking in good mortgage deals and maximising ISA/pension allowances now could be wise.
• Stick to long-term fundamentals – Regardless of market noise, sound investment principles remain your best guide through volatility.

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.