2025 has already been eventful for investors. Many factors are influencing market volatility, and one cause you might have overlooked is the emotions of investors. Read on to find out why fear and anxiety might lead to the value of investments falling.
US president Donald Trump entered the White House for a second term in January. Since then, his policies have caused global uncertainty, particularly the introduction of tariffs on goods imported into the US.
Indeed, Forbes reported in April 2025 that during the first 90 days of the new administration, the S&P 500 (an index of 500 leading companies) had tumbled 15% from its peak. The Nasdaq, a technology-focused index, had fallen 20%.
It’s not just US markets that have been affected. Markets around the world have experienced volatility.
While the overall trend has been a downward one, there have been points where the market has picked up.
For example, on 10 April, Trump paused his tariffs against most nations except China. The Guardian reported markets surged following the news – the S&P 500 was up 5.6% and the Nasdaq jumped more than 8% – as investors hoped there would be a renewed focus on trade deals.
So, over the last few months, investors have experienced larger swings in the value of their investments than they might usually.
It’s easy to look at the news and think that volatility is something that happens to investors. Yet, how investors react to news drives volatility, too.
Emotional investment decisions may result in market declines
At times, investor emotions, like fear and anxiety, may play a major role in market volatility.
When investors are worried, they’re more likely to react based on emotions, even if they usually make logical decisions. Listening to the news about geopolitical tensions could spark large numbers of investors to sell their assets because they’re worried the value could fall.
If enough investors panic sell, it can lead to a downturn that creates yet more uncertainty, which, in turn, might lead to the value of assets falling even further. So, sometimes, short-term market swings are due to investor fear, rather than economic data.
It’s not just negative news that might lead to investors making knee-jerk decisions either.
If the government indicated it might make an investment in Artificial Intelligence (AI), you could see technology stocks benefit from a rise due to excitement about the potential boost, even if the investment doesn’t materialise.
Data from interactive investor highlights how announcements might prompt investors to act.
On 7 April, Trump announced so-called reciprocal tariffs on many nations. This led to market volatility and a record number of people buying and selling assets through the investment platform. In fact, trading volumes were 36% higher than the former record, which was set just a week earlier during a similar period of volatility.
While some of these investors may have made decisions based on worries about the future, others might have been excited at the prospect of being able to buy when the market is low. These decisions made by individual investors will have played a small role in the volatility the market experienced.
3 quick tips for keeping your emotions in check during volatility
While investment returns cannot be guaranteed, reviewing the historical data suggests markets deliver a return over a long-term time frame. Remembering this during periods of volatility could help ease your nerves.
Here are three quick tips that might enable you to keep your emotions in check when investing.
- Turn off the noise. If hearing about what’s happening in the markets puts you on edge, simply turning off the noise and not checking the performance of your investments outside of regular reviews can be hugely helpful.
- Recognise that news headlines aren’t your portfolio. Headlines shouting about markets “plummeting” can be scary, but they often don’t represent what’s happening in your portfolio. Diversified investments may mean that when one area experiences a dip, gains in another balance it out. For instance, you might read that technology stocks have lost 10%, but they are likely to represent only a small portion of your entire portfolio.
- Review the long-term performance of your investments. Nobody wants to look at their investment portfolio and find the value is lower today than it was yesterday. However, you should invest with a long-term goal. So, rather than comparing the value to last week, look at the performance over years or even decades.
Get in touch to talk about your investment portfolio
If you have any questions about what the current market volatility means for your investments and financial plan, please get in touch. We’re here to help you tune out emotions like fear and focus on how to achieve your long-term goals.
Please note:
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
