The stock market has experienced significant volatility recently due to ongoing uncertainty about tariffs. Daily updates on President Trump’s policies and their implications for global trade have fueled a substantial panic-driven sell-off. However, investors should be cautious about reacting impulsively to the daily news.
This period of economic turbulence presents an opportunity to look at historical patterns in the stock market. Chaos in the stock market is not new.
Stocks To Watch | đź“ŠReady, set, trade! Keep an eye on these stocks as they set the market abuzz #StockMarket #TrumpTarrifs pic.twitter.com/41mknETjSO
— ET NOW (@ETNOWlive) April 16, 2025
During Donald Trump’s first term as president from 2017 to 2021, the S&P 500 index gained 69% while the Nasdaq Composite soared by 142%.
These impressive returns occurred despite significant chaos, particularly during the peak of the COVID-19 pandemic. President Joe Biden succeeded Trump and served from 2021 to 2025. During Biden’s term, the S&P 500 and Nasdaq Composite rose by 56% and 46%, respectively.
VIX dropped to 30 for its fourth decline in five days, continuing its retreat from last week’s spike pic.twitter.com/KMC5T41U7T
— Liz Ann Sonders (@LizAnnSonders) April 16, 2025
However, concerns over high inflation and rising interest rates tempered enthusiasm over these gains. This led voters to opt for change in the recent election, resulting in Trump’s reelection. Following Trump’s reelection, investor sentiment initially surged.
Tariff uncertainty and market reactions
Between November 5 and December 31, 2024, the S&P 500 gained up to 5% and the Nasdaq increased by 9%. However, these gains receded towards the end of December, primarily due to concerns over potential tariffs that Trump frequently mentioned during his campaign.
Historical trends indicate that emotions play a significant role in stock market behavior. Investors often struggle with focusing too much on short-term volatility. An examination of long-term stock market performance reveals that major indexes like the S&P 500, Nasdaq Composite, Russell 2000, and Dow Jones Industrial Average tend to break records following periods of uncertainty.
Economic indicators such as inflation, interest rates, unemployment rates, and the potential for tariffs have undeniably caused market turbulence. Despite this, the long-term message is clear: investing during downturns and holding for the long term has historically been a sound strategy. Although history favors investing during market weaknesses, appropriate strategies depend on individual risk appetites.
For growth-oriented investors, buying stocks during market dips could prove rewarding in the long run. For those seeking more stable investments, allocating capital to exchange-traded funds (ETFs) that track major indexes might be prudent. The overarching idea is that investing during periods of chaos, uncertainty, and volatility tends to yield positive results in the long term, despite the discomfort caused by short-term market fluctuations.
In conclusion, while the stock market may be uncertain due to ongoing tariff discussions and economic concerns, historical patterns suggest that maintaining a long-term investment perspective can potentially lead to substantial gains. The market may look irrational at times, but it is actively discounting the impacts of global events on corporate earnings faster than ever before.
Image Credits: Photo by Maksym Kaharlytskyi; Unsplash
