Stock Market Shaken by Tariffs: What It Means for Your Money

In the wake of sweeping U.S. tariffs, global stock markets have taken a sharp tumble, raising serious concerns among investors, businesses, and everyday savers alike. But is this enough to call it a market “crash”? And more importantly, what does it mean for your finances?

How Bad Is It?

Historically, a stock market “crash” refers to a drop of more than 20% in a single day or within a very short timeframe. The infamous Black Monday on 19 October 1987 saw U.S. markets plunge by 23% in just one day. Similarly, the 1929 Wall Street Crash wiped out over 20% in two days and eventually over 50% in three weeks, ushering in the Great Depression.

Today’s market decline, while alarming, hasn’t yet reached those levels. The U.S. market is currently down about 17% from its recent peak and 2% lower than where it stood a year ago. However, these are some of the fastest and steepest drops since the COVID-19 panic in early 2020.

We are hovering dangerously close to entering a bear market, typically defined as a 20% drop from a recent high, signaling prolonged pessimism and potential economic slowdown.

What Does It Mean for You?

Even if you don’t trade stocks, your financial well-being might still be affected, particularly through your pension savings.

There are two main types of pensions:

• Defined Benefit Schemes: Offer a guaranteed retirement income and are generally unaffected by market fluctuations.
• Defined Contribution Plans: The value of your pension pot depends on investment performance, including stocks and bonds.

While market dips may worry those with defined contribution plans, not all pension money is invested in stocks. A large share often goes into government bonds, which are considered safer and tend to rise when markets fall, offering some protection.

In fact, during the current sell-off, bond values have increased, softening the blow for many savers. Plus, if you’re nearing retirement, your fund is likely weighted more towards bonds, reducing risk.

Why It Still Matters

Falling markets do more than just dent portfolios—they reflect declining confidence in future company profits. The tariff policies announced by U.S. President Donald Trump are widely expected to:

• Increase costs
• Reduce consumer demand
• Squeeze company profits

In short, markets are reacting to fears of slower growth, job cuts, and reduced investment. While your pension may weather the storm, the broader concern is the potential for an economic downturn.

Historically, steep declines often precede recessions. That makes this moment significant—not just for investors, but for workers, businesses, and economies worldwide.