The markets have been quite choppy lately, with global shares – especially in the US – taking significant hits over the past 3-4 weeks. This volatility stems from several factors: worries about potential Trump Administration tariffs sparking trade wars, DeepSeek’s new AI reasoning model challenging US tech dominance, and growing US-Ukraine tensions raising concerns about conflict escalation.
The S&P500 started 2025 well with a 4.5% gain until 19 February, but then reversed sharply, falling to -6.1% year-to-date by mid-March. This decline feels particularly sharp following the strong performance throughout 2024. However, global markets have shown varied results, highlighting the importance of diversification:
- NZ share market (NZX50): down 6.9% year-to-date
- Australian share market (ASX200): down 5.0%
- UK share market (FTSE100): up 4.5%
- German share market (DAX): up 13.3%
History shows the dangers of making emotional investment decisions. In December 2018, the S&P500 dropped 15.7% over three weeks due to similar trade tariff concerns, only to bounce back 15.0% in the following five weeks. Likewise, during the COVID-19 market crash (February-March 2020), markets plunged 33.9% in four weeks before recovering 30.2% in the next five weeks. These examples show how selling during uncertainty often means missing the recovery.
When major market events occur, picking winners and losers becomes extremely difficult due to complex downstream effects, policy uncertainty, and efficient markets that already price in public information. The meeting stressed that trying to time the market or make decisions based on current headlines typically leads to poor outcomes.
Even in strong market years, temporary declines are normal. In 2024, despite the S&P500 gaining 23.3% overall, prices fell on about 43% of trading days. The current correction appears minor when viewed against long-term market performance, reinforcing the need to maintain perspective rather than fixating on short-term movements.
The discussion concluded that investors should concentrate on factors within their control: working with advisers to ensure adequate savings, planning for future expenses, and maintaining appropriate risk levels for their personal circumstances. With proper diversification and patience, temporary market turbulence shouldn’t derail long-term investment strategies.