Trump tariffs create this potential buying opportunity
Financial shocks come round every few years, but stock markets spend more time rising than falling. Analyst Rodney Hobson explains what he believes is the best way to play this crash.
9th April 2025 09:12
by Rodney Hobson from interactive investor
If you are fed up with all that advice dished out in March about investing in ISAs before the financial year end, please read on. I believe that now, the start of the financial year, is the time to transfer funds into your ISA account and get the cash invested in stocks and shares.
That is true every year but, thanks indirectly to US President Donald Trump, it is especially relevant for 2025-26. Headlines proclaiming that trillions of dollars, pounds and euros had been wiped off the value of shares across the world after Trump went ahead with his threat to impose widespread tariffs, caused panic across the investing community.
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Yet the other way of looking at a sharp fall in prices is that it opens up a potential buying opportunity. When everyone else is panicking, it pays to keep a cool head.
If you put £1,000 on a horse to win the Grand National last Saturday and you picked a loser (after all, most horses lost) then you are now £1,000 poorer and sadder. If you put £1,000 on a company that saw its share price fall by 10% (most shares did not fall by as much as that) then you still have £900 to your name. Keep a sense of perspective.
It is true that stock market shocks come round every few years. We are only a quarter of the way into the 21st century and already we have had the tech boom-and-bust, the banking crisis, Covid and now tariff wars to contend with. However, any seasoned investor will tell you that the more crisis you live through the easier it is to cope with the next one. Stock markets spend more time rising than falling.
The Dow Jones Industrial Average peaked at 45,000 in December and was pushing that level again as recently as February. It lost 12% in less than three days to just above 37,000. Yet any investor who bought shares in the index before the end of 2023 was still ahead even without counting in any dividends received in the past 15 months.
Source: TradingView. Past performance is not a guide to future performance.
The S&P 500 dropped from 5,700 points at 4pm New York time last Wednesday to below 5,000 on Monday morning, a similar percentage fall but again a better level than it had ever seen before the start of last year.
The Nasdaq Composite index was 17,600 before Trump followed through on his threats. It slumped below 15,000 points by the start of this week, another double-digit fall. It was at 10,500 just over two years ago. Remarkably, this index is nearly double the level it stood at five years ago. Even the Dow, which has not benefited to the same extent from the recent massive surge in American tech stocks, is still up 60% over the past five years.
The last time investors thought the world was coming to an end was in March 2020 when the full horrors of the Covid-19 epidemic became clear. That plunge now looks like a minor blip on all three charts.
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In his epic poem The Waste Land, TS Eliot called April the cruelest month. It was for those investors who, to paraphrase Eliot, saw lying before them deserts of vast eternity after stock market crashes in 2003, 2009 and 2020. Not so for those who saw the great buying opportunities that arose in April in each of those years. Stock markets are already stabilizing. As Eliot put it, time’s winged chariot is hurrying near.
Update: Do not beat yourself up if your timing is less than perfect; likewise, do not boast too much if you get it spot on. So I will not claim I had a crystal ball when writing last week’s column in which I warned investors to stay well clear of Tesla Inc TSLA on the grounds that its shares were seriously overvalued. They closed last Wednesday at $282. They are now $225. I still cannot see the case for buying, but investors who disagree can at least buy in nearly 20% cheaper.
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