Tariffs & Market Turmoil: Are We Facing the Next Great Economic Downturn?

The imposition of sweeping tariffs by the US has triggered a significant decline in global stock markets, leading many to question whether we are on the brink of a stock market crash similar to historical events like Black Monday in 1987 or the Wall Street Crash of 1929. A true crash is characterized by a drop of over 20% from recent peaks, but presently, the US market has only fallen about 17% from its peak earlier this year, raising concerns about entering a bear market where declines are more likely than increases.

Most people’s exposure to these market fluctuations comes through pension plans, which fall into two categories: defined benefit schemes that offer fixed income, and defined contribution plans that fluctuate based on market performance. While it may seem that defined contribution plans are exposed to greater risk, a portion of these funds typically goes into safer investments like government bonds, which often rise in value during stock market declines, acting as a safe haven.

As investors focus on share values as indicators of expected company profitability, the market’s current downturn signals widespread concern about falling profits due to rising prices, reduced demand, and job cuts stemming from the tariff situation. This economic uncertainty leads to legitimate fears about a possible downturn, which poses a greater risk than the current volatility affecting pension values.

In the long run, stock investments have historically rewarded patience, as falls like the present one occur periodically and tend to recover. However, this situation serves as a critical juncture for both the financial markets and the global economy, warranting serious attention and strategic planning for individuals and businesses alike.