Tune out the noise and trust the plan: Investing in uncertain times

The Herald Scotland

9 hours ago

President Trump's 'Liberation Day' on April 4 sent markets into a tailspin; the main US Standard & Poor (S&P) 500 market index tumbling 10.53 per cent in dollar terms over two days1.
This was one of the largest two day falls ever seen, the fifth worst since the German defeat of France in 1940 during World War Two1. The fall was that dramatic, it sits alongside other historic era defining moments in recent history. Before bottoming out, the S&P 500 fell by around 20%1.
You would think it would take some time to recover from such a fall. However, would it surprise you to know that over the whole of the second quarter, April, May and June, global stock markets have actually increased in value, to the tune of 5.13%?
UK investors might not have seen all of that profit since sterling has strengthened against the dollar, but overall, markets have been positive. Even after factoring in the April turbulence, the S&P 500 was hitting historic highs every day towards the end of June.
Surely we are living in unprecedented times? Nothing like this could have been seen before? Again, the answer is a surprising 'no.'
Despite these dramatic falls, the Volatility Index (VIX) that measures the fluctuations in the S&P 500 stood at 52.3% on April 8th. Elevated, yes. But not out of the ordinary.
After all, the index stood at 82.7% in March 2020 with the start of Covid lockdowns and 80.9% in 2008 at the start of the Great Financial Crisis1.
(Image: Neil Burns. Photo by Ross Johnston/Newsline Media)
Increased volatility reflects the markets adjusting to latest information, and the tariffs announced by President Trump on Liberation Day were initially much higher than markets had expected. After a bit of shuffling around, the VIX measure by the end of June had dropped to 16.7%. This is well below the over 30-year average since 1990 of 19.5%1.
Markets may appear relatively calm at the moment – could this be a calm before the storm? Potentially. Is there a lesson to be learned here? Firstly, volatility is scary. No-one really enjoys seeing the value of their ISAs or pension funds drop like a stone over a few days.
But much like a trip to the dentist, we probably should see periods of volatility as something to be expected and endured because we know it will be alright in the long run.
The most important lesson that should be learned is one that has been noted many times in the past.
Dramatic market recoveries tend to very quickly follow after major falls. Trying to time the market may be risky approach, as it can lead investors to miss some of the best days of market performance – potentially harming long-term returns.
A study by Fidelity2 in January 2022 found that staying fully invested in the FTSE All-Share index from January 2017 resulted in a return of 6.30%. Missing even only the 10 best days over that period dropped the return to 2.16%, and sitting on the sidelines for any longer meant losing money. None of us have a functioning crystal ball.
Prior to 2022, Retail Prices Index inflation of over 5% a year was last seen in 1990 when it was 9.3%3. Relatively low inflation for over 30 years has tended to hide the effects of rising prices. Slow increases become almost imperceptible. Just look at how everyone felt the pain of the Cost of Living Crisis when inflation hit 13.4% in 2022. It certainly came as a shock to most.
Even over shorter times, low inflation can catch out your long-term spending power. Over 20 years from 2003, the value of the £1 in your pocket dropped to 58p.
Keeping the money in the bank wouldn't have been enough to stop your money dropping in value. On average, the £1 would have been worth 87p by 20234.
Human nature tends to focus on the immediate and short-term risks that stare us in the face.
This is the volatility that we see in stock markets, and by focusing on tomorrow, we can miss the positives that come next week, next month or next year. Slow risks, like inflation, we can ignore and adjust to, even if that means we are eventually worse off. We need to ask ourselves, 'which is the greater risk to my financial wellbeing?'.
The UK Government also seems to agree. The Chancellor has floated the idea of limiting the amount that can be saved in cash ISAs to encourage a greater take up of stocks and shares.
They know the long-term dangers of apparent stability and security.
Setting realistic and achievable investment goals, building a robust and sensible plan and then switching off from the daily noise is often the best course of action.
Knowing you can ignore the chatter and focus on the long term can be quite therapeutic, and talking to a qualified financial planner can help you to design your own financial future.
Neil Burns is Associate Financial Planner based in Acumen's Glasgow office.
Acumen Financial Planning is authorised and regulated by the Financial Conduct Authority. FCA number 218745.
The content of this article should not be regarded as advice. When considering Investments, independent financial advice should be sought.
Footnotes
1. Dimensional - Midyear Review: Stocks' Climb Is Challenged During Volatile First Half: Jul 03, 2025
2. Fidelity – When Doing Nothing is Best
3. Dimensional – Matrix Book 2024
4. Acumen Financial Planning internal research