#herewego

If there's one thing Donald Trump is really good at, it's making everyone talk about him and his actions. So here, it worked this time too. I've been planning to write something for a while now, and here Mr. president gave me an excellent reason to finally start. It's not that I planned to write specifically about him or the fascinating topic of tariffs, but apparently that's what's most relevant right now.

Tariffs and Their Impact on Consumers

Just in case you're somewhat less engaged with the recent exploits of the U.S. president, here's the summary: Trump, who has already declared his intention several times, has indeed imposed tariffs on imports to the U.S.

The minimum tariff that will be imposed is 10%, but in some cases it's much more. For example, on imports from the European Union, a 20% tariff will be imposed, and China 34% in addition to existing tariffs. In simple terms, the American consumer is about to pay more for almost everything.

It's not just end products that are going to become more expensive. The tariff is also imposed on goods, raw materials, spare parts, and more. Trump repeatedly claims that "other countries will pay the tariff," while most economists argue that this is definitely not the case. Either way, we're talking about a significant shock.

The Impact on Markets

But the truth is that's not what I wanted to talk about. I wanted to write about the impact of tariffs on markets and what this probably does to each of our portfolios. Generally, markets hate uncertainty. Bad news is preferable to uncertainty. Trump is uncertainty incarnate, and therefore markets react in their usual way to extreme uncertainty: they fall.

As of the time of writing these lines, we've seen sharp declines in the U.S. and the rest of the world. This downturn continue today as well, albeit with less intensity. The question is, should this concern me, as a long-term investor? Should I understand in depth what happened, what the implications are, and what's expected to happen going forward?

In my opinion, not necessarily. I can be interested, read, get a bit wiser, and be exposed to various opinions and analyses. However, one thing that's not going to happen is me changing my long-term plans regarding my existing and future investments. On a side note, this could be a good opportunity to re-examine portfolio composition, for example for someone who's only invested in the S&P 500.

Of course, today this is the hot topic. It's the trigger for the declines we're seeing, and it might turn out in retrospect to be the beginning of a negative trend in markets that will continue for a long time. I don't know. It's doubtful whether anyone knows.

History of Declines

If you zoom out and look at a time span of years and decades, there was always something. In 2020 there was Corona, in 2007-2008 the sub-prime crisis that shook the entire world, and even earlier the dot-com bubble. Ans that's just the last two and a half decades.

What I'm trying to say is that there's always something. And when this something arrives, it's often unexpected - in its intensity, its timing, or in its very existence. I personally am interested in understanding what happened and what the implications are. This is at the level of general interest, and it's really not necessary. It doesn't make me change plans, absolutely not.

The news cycle

And another thing - the internet has recently filled with posts that anyone reading them might get the feeling we're dealing with the greatest crisis in history. This is natural, and it's very possible that investors who started investing in recent years haven't yet experienced significant declines.

Indeed, in the two years leading up to January 2025, there were almost no significant declines. Even earlier events like the outbreak of the war in Ukraine caused declines, but they were relatively moderate. Good times are easy to get used to.

However, large declines and even "crashes" are part of the market's nature. They always were and apparently always will be. Those who have already experienced such periods know this, and ideally also know how to cope. Those who haven't might panic and maybe even stress out.

What to Do During Declines

It's not pleasant to wake up to losses of several thousand, maybe even tens of thousands, especially for those who got used to the market only going up. Historically, the best thing is to do nothing. Turn off the computer, go do something else.

And with that said, I'd better listen to my own advice and turn off the computer.