Learning from the Past: What Trump’s Tariffs Are Teaching Investors About Emotional Decisions 

Learning from the Past: What Trump’s Tariffs Are Teaching Investors About Emotional Decisions 

The global investment landscape was once again jolted by President Donald Trump’s dramatic tariff announcement — dubbed “Liberation Day.” Financial markets have reacted sharply, with widespread uncertainty echoing across sectors. For investors, the psychological undercurrents of these market movements are both familiar and instructive. 

We’ve seen this behaviour before — vividly during the COVID-19 market crash of 2020. At the time, investor anxiety surged alongside market volatility. Under Paul Nixon’s guidance, Momentum’s behavioural finance team studied how investors responded emotionally during that crisis. What they found was striking. 

Over 11,500 switches — each exceeding R1,000 — were made on the Momentum Wealth platform during 2020, with the average switch valued at just over R150,000. A switch, in this context, reflects a change in strategy — usually away from growth-focused funds to those deemed “safer.” This represents an emotional tradeoff: the comfort of safety now versus the long-term potential of growth later. 

March 2020 saw a spike in switching activity, almost tripling January’s numbers as fear took hold. Investors were clearly in “risk off” mode through March and April, reallocating to perceived safe havens. But the cost of those switches was profound. 

Behavioural data reveals a grim truth. In March 2020, each switch destroyed an average of 0.13% in annualised investment value. By May, that figure ballooned to 8.9%, and by August, to a staggering 19.44% per switch. Why? Investors fled to safety and stayed there, missing much of the market’s rebound. It’s the cruel irony of panic — you’re out of the market just when it starts to recover. 

The lesson is timeless: the cost of emotional decisions in investing can be steep. A 20% loss requires a 25% return just to break even. Yet many investors remain on the sidelines, in low-risk funds, watching recovery pass them by. 

With Trump’s new tariffs igniting fresh fear, history may be repeating itself. While China has responded strongly with a 34% tariff, other global powers like India have opted for diplomatic negotiation. Markets, however, are pricing in a worst-case scenario — a full-blown trade war — despite these varied global responses. 

Preliminary projections suggest that South Africa could see GDP growth trimmed by 0.3 to 0.5 percentage points, while inflation could rise by 0.2 points. Uncertainty looms. But uncertainty is not new. 

This is a moment for composure, not reaction. Economic and political headlines come and go, but an investor’s long-term goals should remain constant. If your goals haven’t changed, neither should your strategy. Attempts to time the market — jumping in and out based on fear or speculation — almost always lead to diminished returns. 

We will continue to monitor the global developments and adjust strategies prudently. But the core message remains unchanged: emotional decisions are costly, and history shows that disciplined investors are the ones who emerge strongest. 

When markets tremble and headlines scream, remember the four most dangerous words in investing: “This time, it’s different.” 

Because it probably isn’t.