Financial media, like most media, often reports on events that will generate high reader engagement. As negative events tend to elicit stronger and faster emotional responses than positive ones, this can influence media coverage and the type of articles readers gravitate towards.

Recently a variety of publications—including personal finance columns—have been appealing to our heightened emotions with variations of oversimplified advice such as “get out of the stock market now!” or warnings of an “imminent market crash.” For investors who have defined goals and a plan to achieve them through well-constructed portfolios, such generic advice is not only unhelpful but could derail them from reaching their investment goals. Conversely, for those without a clear investment strategy, and who may now realize that their portfolio is too risky for their circumstances, such messaging may be a prudent call to action in defining and implementing a suitable investment plan.

In this article, we’ll take a step back from the headlines and review the current market environment in order to offer a different perspective with the goal of reinforcing the best path forward for investors.

Healthy (but uncomfortable) volatility

Headlines and media attention have been fuelling significant unease around trade war escalation, which has dramatically shifted market sentiment over the past few weeks. This came to a head after President Trump’s April 2, 2025 announcement of sweeping reciprocal tariffs. Though an extended trade war would be negative to the global economy, and increase the possibility of a recession and further stock market declines, this outcome is also not inevitable.

Volatility is a normal and necessary feature of the market that provides investors with the opportunity for meaningful returns over time. Given the environment, market volatility also makes particular sense right now as policy uncertainty is creating headwinds to the economy in addition to company earnings. But viewed from a different perspective, the current uncertainty could also be seen as the catalyst for a healthy correction in parts of the market that may have been getting complacent with lofty valuations. After all, investors have been rewarded with excellent, above-average returns over the past two years which, by definition, can’t continue indefinitely. Periods of adjustment are a natural, albeit unpleasant, part of the market cycle and can help temper unrealistic expectations before they cause further challenges.

Broad market impact

Prior to the reciprocal tariff announcements on April 2, 2025, the greatest pullbacks have been focused on some of the best performing areas of the global stock market over the past few years, including large, US companies—specifically those in technology and related industries. Seeing some declines in these pockets of the markets is normal, as investors digest new information and reassess their previous (and potentially unabated) optimism. As markets digest the potential implications of the reciprocal tariff announcements, we’re currently seeing more broad based declines across global stock markets, although US stocks continue to be most heavily impacted.

As the largest stock market in the world, the US often garners the most media attention which, given recent performance, has been fairly negative as of late. However, it's important to remember US stocks don't fully represent the global market nor do they normally make up the entirety of a diversified investor’s portfolio.

To put this into perspective, let's review the year-to-date performance (prior to the reciprocal tariff announcements) of several markets that have so far (perhaps surprisingly) delivered varied returns. As alluded to, the S&P 500 and NASDAQ Composite have experienced negative returns, reflecting the recent pullback of many high-flying US stocks. The S&P/TSX Composite, representing Canadian stocks, has shown modest gains of three per cent, despite being slightly below its all-time highs. International developed stocks, represented by MSCI EAFE, have seen strong returns of nearly eight per cent. Canadian bonds have also demonstrated positive returns, acting as a stabilizing force within balanced portfolios.

A diversified index portfolio with 60 per cent equity and 40 per cent fixed income allocation has yielded stable results, posting a gain of 2.5 per cent and only experiencing a 1.1 per cent decrease from its all-time highs. This highlights how diversification can be a crucial strategy for investors in smoothing out their portfolio returns.

As of the morning of Thursday, April 3, markets are negatively reacting to yesterday's tariff announcements. US stocks lead the declines with the S&P 500 and NASDAQ Composite down roughly 3.5 and 4.5 percent respectively. The S&P/TSX is down roughly 2.8 per cent while the MSCI EAFE is down roughly 1.2 per cent. Canadian bonds are hovering around zero. The 60/40 Index portfolio would be down approximately 0.9 per cent, but remains positive for the year.