Introduction: What’s Shaking the Markets Now?
Global markets have recently stumbled under the weight of multiple pressures. Chief among these are:
- Tariff uncertainty, with the Trump administration poised to reintroduce sweeping reciprocal tariffs.
- A US tech sector selloff, which has rippled through growth-heavy indices.
- Sticky inflation and central bank inaction, with major economies keeping interest rates elevated longer than expected.
- Geopolitical instability, particularly in Eastern Europe and the Middle East, fanning concerns over energy and supply chain disruptions.
Together, these create a perfect storm of policy risk, valuation compression, and sentiment erosion. But this is not the first time we’ve seen such turmoil.
Learning from the Past: Market Drawdowns and Recovery
To contextualize today’s headlines, we return to a familiar truth: markets stumble, but they recover.
We analyzed the historical total return index of three ETF portfolios: Worldwide Growth, Balanced, and Defensive. These portfolios experienced multiple drawdowns — from COVID and post-COVID stagflation to recent monetary policy surprises; and of course the previous Trump Trade War ending late 2019. Despite these shocks, all portfolios ultimately resumed their growth trajectories.
Investors who remained invested throughout these drawdowns were rewarded. And those who entered during 2023–24, despite current jitters, are still up meaningfully. The green line, representing offshore, globally diversified investments, clearly shows the benefit of not reacting emotionally to downturns.
As we often remind clients: we do not uproot our trees during a storm. We plant for the long term, and we allow disciplined diversification and compounding to do their quiet work.
Tariffs in Historical Context
Tariffs are not new. History shows that their effects vary based on global conditions and policy responses. Here’s a summary of key tariff episodes:
| Tariff Episode | Tenure | Market Impact | Notes |
|---|---|---|---|
| Smoot-Hawley (1930s) | ~1930–1934 | Deepened Great Depression, trade fell 60% | Catastrophic in weak global economy |
| Reagan VERs (1980s) | ~1981–1985 | Modest impact, equity markets still grew | Limited to certain sectors |
| Bush Steel (2002–03) | 21 months | Job losses in downstream industries | Repealed under threat of EU retaliation |
| Trump Tariffs (2018–20+) | 2018–2020+ | Major volatility, supply chain disruption | Markets rebounded on dovish Fed & trade truce |
Key takeaway: Tariffs cause volatility, but markets often rebound swiftly once policy clarity emerges.
Current Market Health: Are We Resilient?
Today’s macro landscape is complex, but not dire:
- Corporate earnings remain solid outside of tech.
- Consumer spending is slowing but remains healthy.
- Balance sheets (both private and corporate) are relatively robust.
- Inflation is moderating, albeit slowly.
- There is no systemic financial stress akin to 2008.
This paints a picture of resilient but fatigued markets, more likely to chop sideways than collapse. Flat but volatile growth may characterize the next year.
This backdrop matters: tariffs in a resilient market create buy-the-dip conditions, not crisis scenarios.
Beware the Rebound: Markets Move Fast
History shows that some of the strongest rallies happen during periods of maximum fear. This includes tariff-driven selloffs. For example:
- In late 2019, after months of trade-war tension, equity markets rebounded sharply on news of the Phase One deal.
- In early 2020, even before COVID hit full force, markets rallied briefly after easing of tariff rhetoric.
Missing just a few strong days can drastically reduce long-term returns. As such, reactive selling in a volatile environment can be far more damaging than short-term drawdowns.
Closing Message: Plant and Hold
At Index Solutions, we believe in the power of rational diversification and long-term participation.
We design our portfolios not for the next headline, but for the next decade. Our imagery — trees growing in shifting weather — reminds us of a truth borne out in every market cycle: it is better to plant wisely and hold through the storms, than to uproot at every gust of wind.
Stay invested. Stay rational. Let your portfolio grow.
www.indexsolutions.co.za Invest wisely. Grow patiently.
