After US President Donald Trump showered the world with radical tariff demands, the stock markets went into a tailspin. 5 answers to the most important questions.
1) What happened?
On 2 April, US President Donald Trump announced new tariffs. Their scale took the markets by surprise – and so sharp price corrections followed. Since 5 April, base tariffs of at least 10 percent have been in force on imports into the US. Beyond that, further complex tariff rules apply. The more a country's imports into the US exceed that country's exports from the US, the higher the tariffs. China quickly responded to the threatened tariff of 34 percent by announcing a counter-tariff of 34 percent – which put additional pressure on the stock markets in the US and Asia.
2) What comes next?
Trump has been wielding the tariff club for a while now. In the first quarter, however, it was mainly the US markets that suffered from it. The exchanges in Europe, by contrast, were on a roll. That run was then interrupted by the new tariff announcements.
A spiral of tariffs and counter-tariffs could slow economic growth and fuel inflation – in the US and in all affected countries. However: for now, it remains unclear how long the tariffs will stay in force. According to the US government, more than 50 countries want to negotiate over the radical tariff package. Trump signaled a willingness to talk.
Whether tariff or interest rate policy, economic or price development: „At no point can anyone precisely foresee everything that will happen next,“ emphasizes Philipp Dobbert, head of asset management at quirion and Quirin Privatbank. This is especially true for trends on the stock market. „The US exchanges delivered outstanding performance in 2023 and 2024 – with gains of more than 20 percent each in the S&P 500. No one had forecast it that way.“ On the contrary: there was repeated speculation about a possible setback for the markets. „There are always good reasons that speak for rising or falling prices. But it's far too risky to bet your money on shaky forecasts coming true.“
3) How should the market reaction be interpreted?
Crises and price slumps have occurred again and again in the past. As with so many things, when it comes to investing, it also depends on perspective. And that is put into perspective by your time horizon. Despite everything, the global economy remains geared toward growth over the long term. That is the reason why – in spite of all crises – over the long term and on average, the markets have so far always gone up.
4) Should I steer clear of stocks for now?
The usual headlines with scary metaphors like „market quake“ or „price massacre,“ the anxious glance at your own portfolio: in situations like these, it's often hard to stay calm. „Flee quickly at the first sign of danger: this tendency sits deep in our brain,“ notes Dobbert. „Impulsive, emotional reactions – as understandable as they are – can nevertheless jeopardize investment success.“
Getting the optimal timing for entering and exiting right goes wrong in the vast majority of cases. Because: „You only ever know the optimal moment in hindsight,“ explains Dobbert. „Anyone who exits the market hastily may turn a temporary loss in their portfolio into a real one.“ And when the markets then turn around again, the question is: When do you trust the trend and get back in? „That's where most people fail.“ The markets' return opportunities are quickly missed.
5) How should I invest now?
Even though Trump can strongly influence the rules of the game in world trade: the rules for investing don't change because of it. What remains important is to diversify your own portfolio as broadly as possible. „When larger turbulence hits many markets at once during certain phases, even a broadly diversified global ETF portfolio can't escape the development,“ Dobbert explains. „But over the long term, it offers an optimal ratio of return opportunities to risks.“
When considering how to invest your money, what counts is not a look at the current prices anyway. Rather, it's a look at yourself: How long do I want to invest for? What price fluctuations can I bear? „Depending on individual investment horizon and personal risk appetite, we blend bonds into our global equity portfolio,“ Dobbert explains. „Bonds can help cushion the price fluctuations of the equity portion.“ And even if the price fluctuations on the stock markets are currently higher: „Over the long term, equities as an asset class offer outstanding return opportunities. That remains the case.“
More about the advantages of diversification can be found here.
