Disclaimer: the ideas expressed in this article are the personal views of Dave Gow, and shouldn't be construed as financial advice. All data is accurate as of the date of publication.

Markets are rattled.

If there’s one thing stock markets hate, it’s uncertainty.

Trump’s tariffs and news out of The White House is driving markets up and down on a daily basis, with swings far bigger than normal.

Down 5%. Down 7%. Up 9%. Down 4%. Crazy stuff.

There’s talk of a global recession as the proposed tariffs go into effect (assuming they do).

Your share portfolio is likely in the red over the last few weeks. Your super fund may also be down. Add to that the shaky Aussie dollar, and people are understandably nervous.

This article is here to cut through the panic and share my thoughts on what’s happening. I’ll tell you exactly what I’m doing right now, and we’ll look at what you might consider doing depending on your situation.

What’s happening and what is it affecting?

Trump has put tariffs on imports to the US – ranging from 10% to an eye-watering 145% on China.

As you might imagine, this creates some disruption to global trade. The uncertainty causes businesses to pause, assess, and figure out how to handle the new world they find themselves in.

As for Australia, we’re heavily reliant on mining and exports to China, so we’re vulnerable to the ripple effects. The tariffs could lead to less demand for our minerals, having a flow-on effect to the economy.

The changes also create confusion, fear, and uncertainty with consumers. That becomes problematic if it leads to lower spending and less investment, slowing the economy further. Fear can create its own feedback loop, making the problem worse, or creating a problem out of thin air.

So, what could happen from here?

Many possible outcomes

Firstly, let’s accept that the uncertainties involved mean that thinking we can figure out what’s going to happen is laughable.

The next five days are not forecastable, let alone the next five years.

In fact, you should probably ignore anyone who thinks they can confidently predict how things will play out. These people, quite frankly, are idiots.

Why? Because of the second and third order effects.

President Trump announces something > People and businesses react > World leaders react > People and businesses react to world leaders reacting > President Trump reacts to world leaders reacting > People and businesses react to President Trump's new reaction. On and on.

All have flow-on effects for the economy, markets, jobs, interest rates, inflation. Not only that, it changes every time a new reaction is added to the sequence.

The best we can do is flesh out the possibilities, and what the outcomes of those could be.

Tariffs could slow global growth. That could lead to lower profits and job losses as unemployment rises. The Aussie economy could fare worse, as mineral demand from China greatly slows.

Things could also get harder as the Aussie dollar falls, making it more expensive to import goods into Australia. But it’s not all doom and gloom, because this is only one side of the coin (more on that in a moment).

All of the above could happen, and it could get ugly. Or, the economy kind of muddles along with no major problems – people and businesses simply adapt slowly to the changes.

What about inflation and interest rates?

One argument is that tariffs will push up prices, which would lead to higher inflation and interest rates – compounding the pain.

I happen to disagree with this as a short-term likelihood. Right now, the dominant forces are fear, job losses, and uncertainty. In my view, all of these are likely to lead to rate cuts rather than rate rises.

In practice, it takes time for businesses to adapt and re-price their products and services accordingly. And it takes even longer for that change to make its way into inflation data that the RBA would act upon.

To me, it looks more likely that the RBA cuts rates in the short-term to provide cashflow relief to consumers and businesses and to dilute the impact of the expected job losses. This is especially so given the economy was already slowing heading into this period.

Assuming the economy adapts to tariffs, and nothing blows up, the eventual higher inflation could then lead to higher rates later. But Australia could also benefit from China wanting (or needing) to export more products to non-US countries. This could lead to cheaper prices for all sorts of things.

Ultimately, there’s a case for interest rates moving in both directions, but I believe rate cuts are more likely in the short term. But don’t take my word for it – the futures market is pricing in up to five interest rate cuts in the next 12 months.

Will we have a recession?

Very possible. But if we do, it probably won’t be a long one given the following…

• The RBA has room for massive interest rate cuts
• Our falling Aussie dollar helps exports, tourism, etc.
• The Government still has room to spend to support if needed
• Tariffs may even be wound back or paused if the pain proves too much

Because of the above, I’m doubtful of a drawn-out recession. I think it’s more likely we’ll see a bumpy period as the world adjusts to what could be the new normal.

In practice, mortgages might get a fair bit cheaper, which could then fuel a new property boom, with all the associated services, spending, and construction that goes alongside.

The rate cuts and government spending would provide further confidence and support jobs, helping the economy bounce back quicker than otherwise.

How bad could markets get?

The truth is, no one knows.

Do you remember how crazy COVID was? The ASX fell 37% in a single month! It felt like there was no end in sight. Nobody knew what the hell was going on.

As a general rule, the greater the uncertainty, the further markets fall. At least with tariffs, they are somewhat measurable. That means analysts are able to come up with guesstimates of the financial impacts.

The greater certainty this provides (relative to a pandemic, for example) can help asset prices find a ‘floor’ a bit sooner.

Yes, it’s scary – especially so if you’ve only just begun investing. But realise that this is a natural feature of share markets.

Things happen. Markets panic. It’s basically “sell first, ask questions later.”

Then something amazing happens: the world goes on. Economies adapt to change. Companies pivot. People keep living their lives.

So what should you do?

Firstly, here’s what I would do as an accumulator.

Don’t panic. This is the most important part. We’ve seen scary headlines before, and these ones aren’t great, but they also won’t be the last. I always do my best to keep calm and realise the world moves past every problem it faces.

Keep investing. Finances permitting, I would stick to my plan exactly the same as before. No pauses. No waiting to see how things play out. Zero changes. Just steady, continual investing. If anything, I would try to find more money to invest.

Block out the noise. If it bothers you, and you can feel yourself getting anxious, stop looking at markets. Avoid the news, and simply tune out for a while. This will feel strange, but the reality is you can’t control any of it. The more you look, and keep up to date with the ‘world is ending’ media, the more likely you are to make a poor decision.

Fine tune your personal finances. If there’s one time to work harder than normal on your finances, it’s now. Do everything you can to trim or delay expenses, giving you more cash to invest (or put towards any other pursuit that matters to you, like saving). If you can, consider doing extra hours at work, selling a few things on Gumtree or Facebook Marketplace, or downsizing your car. Where can you find or create extra money?

In general, if you’re building your portfolio, a downturn is exactly what you want. It allows you to buy more shares for the same number of dollars. If you can do this, when you look back later, a larger portion of your shares will have been bought at lower prices. That accelerates your returns and portfolio growth when the market recovers.

Of course, there are more advanced strategies such as tapping into home equity to invest with. We went into detail about that in a recent episode of Aussie FIRE. This suits those with solid cashflow, financial discipline, and at least a few years of investing experience.

What if your situation is different?

Let’s say you’re a retiree, living off your investments. Or you’re worried about job losses affecting your industry.

In that case, I would simply hold tight. As usual, keep as much cash buffer as you need to feel comfortable. Avoid selling any assets if you don’t have to. If you can get through this period with your job, savings, and current assets intact, consider that a success.

I definitely wouldn’t be changing my portfolio around or making any big moves right now. It’s more likely to be based on fear, second-guessing, and dramatic media predictions.

I’ve also been asked: what would you do if you had a lump sum right now?

I like this question for two reasons. Firstly, it’s an interesting exercise to think about. Plus, it means my readers are saving a lot of cash!

My answer is: it depends on the situation. If I had a lump sum, but no monthly savings, I would invest it slowly over, say, 6-12 months. But if I was also saving money every month which I could invest, then I’d likely just invest the lump straight away.

More about lump sum investing in this article.

What am I doing right now?

Unfortunately, not much. I actually don’t have any cash available. Ever since my investment mortgages went from 2% to 6% interest rates, there’s been very little left over to invest.

I’d love to be investing right now, so I’m a little jealous of those who can. We’ll be selling a property in the next few months, so I’m actually hoping the market is even lower by then.

That means I’m inadvertently hoping your portfolio goes down further – sorry! ;)

But I’m not selling, and nothing has changed. If I had cash right now, I’d be adding to my portfolio exactly as normal. For me, that’s my two index funds – one Aussie, one global.

I’m also ignoring the news, which I basically do anyway. I just find the stories rather annoying, because they’re always overly dramatic and laden with emotional, useless, negative predictions.

As I’ve said before, the media is not trying to help you. All they care about is emotionally hooking you into clicking and reading/watching. The business model is reliant on manipulation, much like the advertising industry.

I’m pretty much always fully invested, so nothing really changes for me in that regard. Many of you like to keep extra cash for occasions like this. That can work well as a strategy, especially for psychological reasons, but it’s just not something I do.

Final thoughts

Maybe the market has another 25% fall. Or maybe it goes on to new highs by the end of 2025.

If you’re hoping I’ve got some insight into that, sorry, I don’t.

Another way to think about current events is to ask yourself: will this matter in 30 years?

My guess is no. You may see it differently, and that’s okay. Things always feel important, yet they rarely are.

I always try my best to zoom out to gain perspective. When I zoom out and look at past downturns, I’m simply left with the following conclusion:

I wish I could go back and invest in all of the past downturns. And I’d simply buy as much as possible. Because looking back from today’s standpoint, the prices are all cheap as chips and I would’ve earned great returns.

I don't believe this time is any different… unless you think markets and capitalism have fundamentally changed forever.

Historically, the best times to invest were when things felt the scariest. So, if you believe in the long-term growth of markets, times like this are what you’ll look back on and fondly remember you stayed calm and kept investing when others were too afraid.

Until next time, happy long-term investing!

Dave

Dave’s best-selling book Strong Money Australia is available on Amazon. Listen to the audiobook on Spotify or Audible.