Contextualizing Market Volatility Amidst Tariff Concerns

The recent tariff announcements from the White House have roiled markets and economies globally. As we navigate this turbulent period, it’s imperative to focus on the long-term as equity markets have historically climbed the wall of worry.

The stock market is cyclical, experiencing periods of both growth and contraction. While volatility can be unsettling, it is not a new phenomenon. Throughout history, markets have faced significant disruptions, from the Great Depression to the dot-com bubble and the 2008 financial crisis. Despite these challenges, markets have historically rebounded over time, continuously reaching all-time highs and rewarding long-term investors.

While market fluctuations may prompt emotional reactions, it’s essential to remain focused on long-term objectives. Recent disruptions, like those caused by tariffs or other geopolitical events, may result in fear-driven decisions that can lead to missed opportunities during market recoveries. 

Attempting to time the market is notoriously difficult, requiring two correct decisions back to back: when to get out and when to get back in. Studies have consistently shown that missing even a few of the market’s best-performing days can severely impact long-term returns. 

Charlie Munger once stated, “The first rule of compounding is never interrupt it unnecessarily.” This is because the power of compounding is much larger later in the process. Here’s a hypothetical thought experiment. For example, start with $1mm annualizing at a 10% return. After one year this turns into $1.1mm, after 5 years this turns into ~$1.6mm, after 10 years this turns into ~$2.6mm, but after 40 years it is over $45mm.

This is an important moment to ensure that your portfolio is resilient and aligned with your long-term financial goals.

At Oppenheimer, we remain confident in America’s continued leadership in innovation and believe that our markets are still among the strongest places to invest. We are closely monitoring the situation, evaluating potential impacts, and remain committed to providing guidance and actionable insights during these uncertain times via our deep bench of subject matter experts.

Reaffirm Your Long-Term Goals: Market fluctuations are a normal part of investing. Short-term volatility should not distract you from your long-term financial objectives.

Diversification: Ensure that your portfolio is diversified across various asset classes to reduce risk and help weather market volatility. Diversification can help provide stability and helps mitigate the impact of market disruptions.

Avoid Emotional Decisions: It’s natural to feel anxious during volatile times, but emotional decision-making can lead to poor investment choices. Stay focused on your long-term strategy and avoid reacting impulsively to short-term market movements.

Consider Historical Context: Past market downturns—such as the Great Recession, the dot-com bubble, and the COVID-19 pandemic—demonstrate that the markets historically recover.

As we face heightened volatility due to the new tariffs, it is critical to keep the bigger picture in mind. While these periods of uncertainty can create challenges, they also present opportunities for long-term investors. By staying disciplined and adhering to a diversified investment strategy, you are better positioned to navigate this turbulence.

At Oppenheimer, we are here to support you. If you have questions or concerns about how these developments might affect your portfolio, or if you'd like to discuss your long-term investment strategy, please reach out to your Oppenheimer financial professional today. We’re here to help you make informed, rational decisions and continue moving toward your financial goals.