First off, let me say this - for investors, it’s always about the big picture. What’s happening in the markets right now? Sure, it’s noisy. There’s a lot of drama in the financial headlines. But in the grand scheme of things, these short-term moves are just blips on a much longer chart.

I just want to say something here - every time the stock market takes a dive, it’s like everyone suddenly gets amnesia. They forget this has happened before. They forget it’s normal. Sure, every downturn has a different cause, a new headline, a fresh panic - but market drops are part of the deal.

You can’t show up expecting perfectly calm water forever. The tide comes in, the tide goes out - and sometimes a wave hits you harder than expected. That doesn’t mean you stop swimming. It means you learn to ride it.

Every wave is different, sure. But waves are part of the sea - just like volatility is part of the market. What frustrates me is how the financial media acts like every single drop is some wild, never-before-seen event. Like large market dips are unnatural. They're not.

So please - don’t panic. This isn’t new. It’s not the end of the world. The market always recovers. These dips? They’re part of the deal. You’ve got to account for them in your financial plan because they’re going to happen. Always. No exceptions.

I'll dive deeper in a future post on how to actually prepare for these inevitable market drops. It's not rocket science - actually, it's pretty simple. Like most things in finance, once you cut through the noise, the path forward is clear. People love to overcomplicate it, but the key is to keep it simple and stay ready for when this happens for the umpteenth time. Sit back, stay the course, and ride the waves.

Alright - let’s get to the main point of this blog.

What's Actually Going on With the Markets Right Now?

So you want to know what’s actually going on with the stock market, especially when the financial media is in full panic mode. So let’s talk about it.

Look, if some of this goes over your head - no worries. Just nod, smile, and know I’ve got you. The most important thing to understand is this: don’t panic. Market downturns are a normal part of the cycle. If you’ve got that part down, you’re already ahead of the game.

Alright, let’s get into it…

Let's Talk About Tariffs

Tariffs are just taxes that one country slaps on imports from another country. For example, if the U.S. puts a 10% tariff on British cars, and a car costs £30,000 - now it costs £33,000 in the U.S.

Easy enough, right?

But here’s the problem: when countries impose tariffs, it's not China or Europe or the U.S. that directly pays them - it’s the consumer in the U.S., Europe, or China who ends up footing the bill through higher domestic prices. That’s inflation. 

And guess what? Markets don't like it.

Why? Because inflation often means interest rates go up. And when interest rates rise, bond prices fall. Stocks can tumble. That’s what happened in 2022 - remember that? Interest rates rose suddenly, triggering a major correction across the board: the Nasdaq dropped nearly 30%, and bonds took a beating as well. 

So Why Are Tariffs Back in the Spotlight?

Tariffs aren’t new. The EU’s been using them for years. Trump’s approach? More direct. Louder. More dramatic. But hitting imports with tariffs? That’s nothing new.

Take 2024, for example. President Biden, along with the EU and Canada, imposed 100% tariffs on Chinese electric vehicles. The reason is Chinese electric cars at the lower end of the market are the most competitive. This makes it tough for Ford, GM, and Volkswagen to compete with them. So governments stepped in to protect domestic manufacturers.

But protectionism has a price. Higher tariffs = higher prices = inflation risk = market stress.

If a full-blown trade war erupts? We’re talking about a deeper and broader market downturn - not just in stocks, but across the entire financial system.

Do I think Trump wants to tank Wall Street? No. He thrives on a strong market. It’s unlikely he’d push things far enough to cause a crash - at least, not intentionally. I think he's playing a game that will cause a short-lived downturn. Look, the EU don't want a trade war. Germany's in a two-year recession and does well out of exporting to the U.S. They're likely to come to some sort of arrangement. 

And then there’s China. Their economy isn’t performing as well as they’d like, so the last thing they need is more instability. But as we’ve seen in the headlines, they’re not backing down. They're retaliating, pushing back against what they view as Trump’s bullying tactics. The problem is, Trump won’t back down either - his ego won’t let him. We all know that. So where does that leave us? Honestly, it’s hard to say. But I don’t think the EU will get directly involved in the U.S.-China standoff.

Could This All Go... Right?

Maybe - and I say that hesitantly, mostly because of China’s reaction to Trump’s tariffs.

If Europe and China believe Trump is serious - that he’s willing to endure short-term pain for long-term trade gains - they might eventually come to the table. Right now, though, the EU is probably more likely to make a deal than China.

Both regions still maintain a lot of tariffs and trade barriers on goods imported from the U.S.

A successful deal could mean lower tariffs globally. More trade. Better growth. A win for everyone.

But This Goes Beyond Tariffs

Trump’s pivot away from playing the world’s policeman means countries like the UK, Germany, and France need to step up defence spending. That means more government spending - which requires stronger economies.

Consider this: in 2008, the U.S. and Eurozone economies were about the same size. Today? The U.S. economy is nearly 50% larger.

So Europe has to ask itself: if we’re spending more on defence, if we’ve got other liabilities and debt, how do we get better growth?

Oddly enough, Trump might be forcing everybody to become more competitive. 

So yes, Trump could end up lowering global trade barriers and indirectly pushing countries toward greater competitiveness - and that’s not a bad outcome. But there’s real risk too: tariffs could trigger inflation, rising interest rates, and a crash in global equity and bond markets. 

So, What Now?

We’ll see. No one knows exactly how this plays out. My guess? Cooler heads prevail before things go off the rails. But markets don’t wait for certainty - they react to fear, fast.

Just remember: stay calm, stay invested, and know that volatility is part of the journey. The market isn’t broken. This isn’t new. We’ve been here before - and we’ll get through it again. ✨