When President Trump announced his global trade tariffs in early April 2025, the markets went into a tailspin.
Amid uncertainty caused by the war in Ukraine and ongoing conflicts in the Middle East, the S&P 500 tumbled by 18.9% from its February high, according to CNN.
In a remarkable rally, the markets have since steadied. But for some investors, the uncertainty caused by ever-changing tariff announcements has already proven too much.
Spooked by the fluctuations, many cashed in. Even now, with markets riding high again, they remain reluctant to invest.
However, sticking to cash savings could mean you’re missing out on greater returns. Read on to discover three good reasons why, if you’re a hesitant investor, you could feel more confident.
Cautious investors can be deterred from investing due to fear of short-term losses
Headlines declaring financial chaos, 24-hour media coverage, and uncertainty about what the future holds are all enough to send hesitant investors back to the comfort of cash.
And Brits are, seemingly, a naturally cautious breed. According to research by Interactive Investor, 58% of Britons have a low emotional capacity for risk, and are unwilling to accept short-term losses on investments.
Although 32% actually have the financial resilience to manage risk, many are held back by this ultra-cautious attitude.
Even when markets are robust and performing well, this “safe” approach often translates into fears that market highs will be followed by an imminent slump.
Investors can feel more confident by looking at the markets’ historical patterns
While periods of volatility, crashes, and recoveries may feel like a rollercoaster, these are perfectly normal market events.
Looking back at how the markets have behaved could give you more clarity and confidence to invest.
1. The all-time high isn’t a one-off
This rather lofty phrase can make it sound as though the markets are soaring at an unsustainable level. But really, it means that an asset has been sold for a record price. And this happens more often than you might think.
According to Schroders, the market has actually been at an all-time high 31% of the time since January 1926.
2. Investing when the markets are on a high has led to higher average returns
Schroders also found that returns have historically been higher after investing in an all-time-high stock market. On average, returns were 10.4% over 12 months, compared with 8.8% under other market conditions.
3. A reversal in fortunes isn’t a foregone conclusion
Reluctant investors often believe that a market on a high will inevitably lead to an equally dramatic fall. But markets are cyclical, rising and falling, rising and falling.
Attempting to “time the market” is incredibly difficult, with unpredictable factors influencing conditions in ways beyond our control. Rather, “time in the market” is more likely to lead to long-term gains, as you sit tight through market fluctuations.
Take this example from Schroders:
$100 invested in the US stock market in January 1926 would have been worth $103,294 at the end of 2024, adjusted for inflation.
If you had switched out of the market into cash for a month whenever it was at an all-time high, and returning when it wasn’t, your $100 would have grown to just $9,922 over the same period of time.
This is an emphatic 90% lower than the return on the amount left invested.
Financial planning focuses on long-term investments based around your personal approach
Essentially, investments are designed to be long term. When we work with you, we’ll talk through all your goals and aspirations to help you develop a bespoke financial plan designed to fit your circumstances.
Part of this conversation will be about your approach to risk, which will also help us shape the right portfolio for you. This means you’ll have a diversified portfolio with a well-balanced approach to risk, depending on your tolerance.
So, when volatility occurs – as it inevitably will – you can feel reassured that your investments are likely to recover once the markets stabilise.
Really, your strategy only needs to change if your goals and priorities shift.
Get in touch
History tells us that the “all-time high” isn’t always a precursor to a devastating crash. If you’re unsure about investing or you’ve cashed in and would like to find out more about reinvesting, we can help.
Please get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.