Market volatility can feel unsettling, especially when headlines about tariffs, interest rates, or inflation dominate the news. At True Potential, we’re committed to helping you navigate these uncertainties with clarity and confidence. Below, we’ve answered some of the most common questions we’ve received from our advised clients, breaking down complex topics in a way that’s easy to understand. Our goal is to reassure you and provide insight into how we manage your investments during turbulent times.
How do trade tariffs impact market volatility?
Trade tariffs are taxes imposed on goods moving between countries, and they can create ripples across global markets. The United States, as the world’s largest economy, plays a big role in setting the pace for global growth. When significant tariffs are introduced, they can make businesses hesitant to invest and encourage households to cut back on spending. This can slow down economic growth in the U.S. and affect countries like China, which rely heavily on exporting goods. These slowdowns can lead to uncertainty, causing stock prices to fluctuate as investors react to the changing economic outlook. At True Potential, we keep a close eye on these developments to ensure your portfolio remains well-positioned.
How do interest rates impact market volatility?
Interest rates represent the cost of borrowing money, influencing everything from mortgages to business loans. Over the past six months, central banks in major economies, including the Bank of England, have been lowering interest rates to support growth, with more cuts expected. However, interest rates are also influenced by the bond market, where governments borrow money.
In the UK, bond yields (a measure of borrowing costs) have risen this year because investors are expecting higher inflation and more government borrowing to cover daily expenses. In contrast, U.S. bond yields have fallen as investors anticipate slower growth ahead. These shifts can create uncertainty, leading to ups and downs in markets. We manage this by diversifying your investments to cushion against sudden changes.
How does inflation impact market volatility?
Inflation measures how quickly prices for goods and services rise. When inflation spikes unexpectedly – like it did in 2022 when the Consumer Price Index (CPI) soared – it can catch markets off guard, leading to volatility. Back then, the Bank of England’s base rate was just 0.5%, but today it’s 4.25%, reflecting efforts to control inflation. Sudden price increases can make investors nervous about future growth and interest rates, causing market swings.
Our approach ensures your portfolio is built to weather these surprises, balancing assets that respond differently to inflation pressures.
How do we manage True Potential Portfolios during periods of market volatility?
We believe in the power of advanced diversification to guide you through volatile times. This means your portfolio isn’t tied to one investment style or manager. Instead, we combine the expertise of global multi-asset specialists to create a balanced mix of investments. For example, this year, we’ve reduced exposure to U.S. stocks, which have faced uncertainty, and added to trusted managers like Schroders to enhance diversification.
Our Investment Team actively monitors your portfolio, making thoughtful adjustments to help grow your money.
How regularly do we review and adjust the portfolios?
Your peace of mind is our priority, which is why we review True Potential Portfolios every single day. We’re in constant contact with our multi-asset specialists, speaking with them weekly and tracking their transactions daily. This hands-on approach allows us to make adjustments in real time, ensuring your portfolio stays responsive to market changes. Because we only use True Potential funds, we have the flexibility to fine-tune your investments weekly, keeping diversification at the heart of our strategy.
How does diversification help mitigate the effects of market volatility?
Diversification is like not putting all your eggs in one basket. We spread your investments across different types of assets, like stocks and bonds, which often move in opposite directions. For example, when stock prices drop because of economic worries, bond prices tend to rise as investors expect lower interest rates.
This negative correlation helps balance your portfolio, softening the impact of market dips. By carefully blending assets, we aim to protect your wealth while still capturing growth opportunities.
Is it better to hold cash or stay invested during market volatility?
It’s natural to consider holding cash when markets feel unpredictable, but staying invested often proves more rewarding over time. Consider this: the MSCI All Country World Index (ACWI), a global stock market benchmark, delivered a 136% total return from early 2000 to today for those who stayed invested.
However, missing just the 10 best days in those 25 years would have slashed that return to only 27%. That’s a difference of over 100% – all from missing a handful of days. Markets can rebound quickly, and staying invested can potentially help you benefit from those crucial moments of growth.
Are there specific sectors or asset classes that tend to be more resilient during volatility?
Some assets hold up better than others during turbulent times, depending on the economic environment. When inflation is low and central banks are cutting interest rates to support growth, sovereign bonds (government-backed debt) often shine, as their prices tend to rise when stocks falter. However, when inflation is high or rising – like in 2022 – commodities such as gold can offer better protection, as they tend to hold value amid price pressures. We carefully select a mix of assets to ensure your portfolio has resilience, no matter the market conditions.
Can market volatility create investment opportunities, and if so, what kind?
Volatility isn’t just a challenge – it can also be an opportunity. During market dips, like those in late 2018, early 2020, or across 2022, adding to your investments can set you up for stronger returns when markets recover.
This is where compounding – earning returns on your returns – works its magic, especially for those with a long-term perspective. Our multi-asset portfolios are designed to trend upward over time, and investing during downturns has historically boosted compounded returns. We guide you to seize these moments thoughtfully, aligning with your financial goals.
A final word.
Market volatility can feel daunting, but it’s a normal part of investing. At True Potential, we’re here to simplify the complex and keep your portfolio on track. Through advanced diversification, daily oversight, and a commitment to your long-term success, we aim to turn uncertainty into opportunity. If you have more questions or want to discuss your investments, we’re always just a conversation away.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors. Past performance is not a reliable indicator of future results.
True Potential Wealth Management is authorised and regulated by the Financial Conduct Authority. FRN 529810. Registered in England and Wales as a Limited Liability Partnership No. OC356611.
True Potential Investments LLP is authorised and regulated by the Financial Conduct Authority. FRN 527444. Registered in England and Wales as a Limited Liability Partnership No. OC356027.
True Potential LLP is registered in England and Wales as a Limited Liability Partnership No. OC380771.
