Investors in the stock market have had to endure a turbulent 2025 so far. Markets plunged sharply in early April following US President Trump’s surprise “Liberation Day” tariff announcement.
However, the US administration has since implemented a 90-day pause on tariffs for all countries. During this period, import tariffs were reduced to 10% while the US began negotiations for individual trade deals.
Tensions between the US and China also escalated, with reciprocal tariffs climbing as high as 145% on Chinese imports. But shortly after, both countries agreed to a temporary pause in their trade war, signalling the start of discussions towards a broader, long-term trade agreement.
With these developments, global markets have been on a roller-coaster ride. The S&P 500 Index came close to entering bear market territory, defined as a decline of 20% or more from its recent high, but has since rebounded nearly 20% from its 8 April low. As of 31 May, the S&P 500 is trading at 5,911, up 0.7% from the start of the year.
So, what can investors learn from all these ups and downs in the market?
Trying To Predict Events Is Impossible
At a broader level, the key takeaway for investors is this: you can’t invest successfully based on headlines.
Markets react to news quickly, but the situation can change just as fast, sometimes within a single day. While this has always been true throughout the history of stock markets, it’s especially relevant today, given the unpredictable nature of global geopolitics and the speed at which social media spreads news. President Trump’s frequent shifts in stance on tariffs are a prime example of this volatility.
Equally unproductive is the idea of investing based on political leanings or assumptions about what constitutes “market-friendly” policies. History shows that trying to time the market based on which political party holds office, whether Democrat or Republican, has been largely ineffective.
As the chart below illustrates, market returns don’t follow a predictable pattern based on political control, underscoring why long-term discipline matters more than short-term headlines.
Hypothetical growth of $1 invested in the S&P 500 Index, 1926 – 2022
Source: Dimensional Fund Advisors
Instead of reacting to headlines, investors are better off staying consistent with their investment approach and remaining invested. Over the long term, stock markets tend to move upward, driven by steady corporate earnings growth and rising profit margins.
Yes, markets are forward-looking. But even they have struggled to keep up with the sudden U-turns in US tariff policy over the past few weeks.
Trying to beat the market by jumping in and out based on news flow, especially when it changes almost daily, is not only stressful but nearly impossible to get right every time. More often than not, it leads to missed gains and unnecessary anxiety.
That’s why a steady, long-term approach has always worked better for most investors. Not because it’s exciting, but because it works.
Fear Hits Harder Than Joy
One clear lesson from the recent market sell-off is this: the fear of losing money feels far more intense than the joy of seeing our investments grow.
Right after the 2 April drop, many investors were worried that the world, and thus the financial markets, would never be the same again. To be fair, these concerns were valid. Even the Singapore government, one that usually responds cautiously and moderately, issued a ministerial statement, with Prime Minister Lawrence Wong announcing the creation of a task force to support businesses and workers during these challenging times.
But fast forward a few weeks, and markets have rebounded sharply. That’s the tricky thing about fear: it can cloud our judgment and push us to make decisions we later regret.
This reaction isn’t just anecdotal. It’s backed by behavioural science. The phenomenon is known as loss aversion bias, where the emotional impact of a loss is felt much more deeply than the pleasure of a gain of the same size.
And we saw it play out again during the post-Liberation Day sell-off. Emotions ran high, and many investors acted out of fear rather than based on fact.
But letting emotions dictate your investment strategy is rarely a good idea. Fear often leads us to sell at the worst possible time—locking in losses and missing out on the recovery that could follow. Seen through a longer-term lens, this episode isn’t so different from past downturns, like the sharp drop in 2022 when the Fed raised interest rates, or March 2020 when Covid-19 triggered a 30% fall in the S&P 500.
The key takeaway? Stay calm, stay invested, and don’t let fear make decisions for you.
Long-Term Discipline Matters More Than Political Headlines
The recent tariff saga and policy flip-flops from the Trump administration have shown one thing clearly: markets often react in very predictable ways when there’s a crisis of confidence.
In the immediate aftermath of “Liberation Day”, there were widespread fears that the global economy was heading into recession. But just two weeks later, the US government had already softened its stance on tariffs, and incoming economic data looked surprisingly stable.
This episode serves as a reminder that attempting to forecast macroeconomic trends, particularly those influenced by politics, is rarely a productive exercise for investors.
Instead of trying to predict the next move, it’s far more valuable to focus on what we can control: understanding our behavioural biases, staying disciplined in volatile markets, and keeping our eyes on our long-term financial goals.
Because in investing, reacting to noise often costs more than doing nothing at all.
Read Also: Global Stocks Have Rallied To Pre-Trump Tariff Levels. Is It Too Late To Invest?
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