THE UK’s FTSE 100 has plunged to a one-year low as fears deepen over the global impact of Donald Trump’s tariffs.
Analysts have warned that the scale of disruption in global financial markets is one of the worst to be felt in decades amid fears of a global recession.
The “baseline” 10% US tariff on goods imported from around the world came into effect shortly after 5am on Saturday UK time. Many other countries will see their tariff rates increase above that next week – including the EU, which will be hit with a 20% rate.
The FTSE 100 index, which tracks the country’s top 100 listed firms, dropped by about 5% in early trading on Monday as a sharp sell-off kicked in shortly after markets opened.
The panicked mood was felt across Europe, with Germany’s Dax index recording a drop of about 6.5%, and France’s Cac 40 down around 5.3% in the morning.
Overnight, Asian stocks across the board were sinking to new lows after Trump said he will not back down on his sweeping import taxes unless countries even out their trade with the US.
Meanwhile, America’s S&P 500 index suffered one of the worst two-day drops, over Thursday and Friday, since the Second World War.
The scale of the shock is similar to during Covid-19, the global financial crisis, and Black Monday in 1987, according to analysts.
But what does this actually mean for me and my pension?
The main impact is on those who directly own stocks and shares. To put it simply, their investment will be worth less – at least for now.
But the most common way for people in the UK to be exposed to the stock market is through their pension.
Defined contribution pension plans go up and down depending on the financial markets.
That being said, they also hedge their bets by investing in safer assets such as government bonds, which aren’t as impacted by big shocks like the one last week.
In fact, Government bonds have gone up in value since Trump’s announcement as investors see them as a safe bet.
The closer to retirement you are, the more your pension pot is invested in bonds and the less affected you will likely be.
It’s also important to note that this is certainly not the first fall nor will it be the last. Shares have historically been a good investment and pension savings is a long-term game.
More largely, however, a crashing stock market generally signals that the health of the wider global – and UK – economy is less healthy given investors are not investing as much.
The true impact this will all have will reveal itself in the coming days and weeks as businesses and the market react fully to the impact of Trump’s tariffs announcement.
