The start of 2025 has brought major political changes across the Atlantic, with Donald Trump returning to the White House and making immediate and significant policy moves. As expected, global financial markets have responded swiftly and not always calmly.
At Resolve Financial Solutions, we understand that headlines like these can leave investors wondering how international developments might affect their financial plans.
Today, we’ll outline what’s been happening, why it matters, and most importantly, why it’s crucial to stay focused on long-term goals rather than short-term noise.
What’s been happening in the U.S.?
1. Shifting Geopolitical Alliances
Donald Trump’s decision to pause U.S. military support for Ukraine has prompted renewed uncertainty in Europe, particularly among NATO allies. His high-level talks with Russia (held without Ukrainian or European participation) have signalled a dramatic shift in U.S. foreign policy.
European defence stocks have rallied as countries seek to bolster their own security frameworks, while U.S. defence stocks have seen some pressure due to proposed budget cuts. The euro has strengthened slightly against the dollar, although this is influenced by multiple policy factors.
2. Technology and AI Dominate Investment Headlines
Despite broader market volatility, U.S. investment in artificial intelligence continues to surge. The newly announced “Stargate Project” is set to invest $500 billion into AI infrastructure over the next four years. Major players like TSMC have pledged $100 billion in new U.S. chip manufacturing plants, highlighting America’s commitment to onshoring critical technology supply chains.
This focus on AI, while largely positive for long-term tech prospects, comes against the backdrop of increased trade tensions that could strain global supply networks in the short term.
3. A New Era of Tariffs and Trade Tensions
True to form, Donald Trump has swiftly implemented a range of new tariffs on Chinese imports, on Canadian and Mexican goods, and on EU and UK steel and aluminium. These have triggered immediate retaliatory tariffs, with some EU nations now facing the prospect of large tariffs on wine and luxury goods.
This tit-for-tat dynamic has fuelled concerns over a prolonged global trade war. U.S. markets have responded with increased volatility, and fears of a potential recession – nicknamed the “Trumpcession” by some are growing. The dollar has weakened, and inflationary pressure is rising as consumers face higher prices.
What does this mean for UK investors?
Recent market swings have been sharp but not unusual in the context of historical patterns. In February, U.S. equities hit record highs before retreating over 10% bringing them into “correction territory.” Yet it’s important to note that these losses have mostly erased gains made immediately after the election, and global equity indices remain in positive territory year-on-year.
From a UK perspective, here are a few key points to consider:
- Diversification matters – UK investors often hold global portfolios. While U.S. developments can have an outsized impact due to its weight in global markets, the benefits of holding a diversified mix of assets across geographies and sectors help cushion against region-specific volatility.
- Stay focused on your goals – Trying to react to short-term news by moving money in and out of markets can often do more harm than good. Evidence shows that staying invested, especially through volatile periods, offers the best chance of long-term growth.
- Cash is losing value in real terms – With UK inflation still above the Bank of England’s 2% target (latest figures show CPI at 3.4% in February 2025), cash savings are steadily losing purchasing power. While equities carry more short-term risk, they have historically outpaced inflation over the long run.
- Interest rates and economic growth – The Bank of England has held interest rates at 4.5% since late 2024, with expectations of gradual reductions later this year if inflation continues to cool. This could provide a more stable backdrop for UK economic growth in the medium term.
So, should I take any action?
For most investors, the best response is to stay the course. Market fluctuations, especially those driven by geopolitics, are often short-lived, even if they feel unsettling in the moment. History has shown us that reacting emotionally during times of market stress can lead to missed opportunities when recovery inevitably follows.
At Resolve, our approach is rooted in long-term planning, evidence-based investing, and strategic asset allocation. We don’t chase short-term gains, and we don’t believe in trying to time the market. Instead, we focus on building resilient portfolios that are designed to weather all kinds of storms.
Donald Trump’s return to office has certainly added volatility to global markets, but the fundamental principles of investing remain unchanged. We are likely entering a period of heightened geopolitical risk and shifting global alliances, but that doesn’t mean your financial plan needs to change.
If you’re concerned about your portfolio or would like to discuss your investment strategy in more detail, please don’t hesitate to get in touch. We’re here to support you, whatever the headlines may bring.
*Please note: This blog is for information purposes only and does not constitute financial advice. The value of investments can go down as well as up, and past performance is not a guarantee of future returns.