The Trump administration’s policy on tariffs has dominated the news in recent months, as tariffs impact the economy in the U.S., Canada and globally. Stock markets have been affected by the fallout from tariffs and their unpredictable nature – whether tariffs are temporary, permanent or negotiable.

As a mutual fund investor, it’s only natural to be concerned when events beyond our borders could affect the markets and your investment portfolio, whether the issue is tariffs or any future financial crisis.

Markets recover

In the past 25 years, we experienced the 2001 dot-com bubble burst, the 2008 global financial crisis and the 2020 COVID-19 pandemic crash. Although past recoveries don’t guarantee future trends, it’s reassuring to know that each of these crises was followed by a recovery and growth period, with mutual fund investors enjoying record market highs.

The “this time it’s different” trap

If a bear market lingers, some people are at risk of falling into the trap of thinking it’s different this time – this one’s so drastic that the economy and markets will never recover. Legendary investment manager Sir John Templeton once called “this time it’s different” the four most dangerous words in investing, as this belief may lead to poor investment decisions. These words can apply equally to a booming market that some optimistic investors believe will always continue.

If a financial crisis – or a bull run – ever has you thinking this time it’s different, consider that such a situation would be the first time the economic cycle deviates from its regular path of upswings and downswings.

During a correction or bear market, any anxious investors who sell investments or stop investing in equity mutual funds miss out on potential gains. Those who continue to invest during a down market and recovery will purchase fund units at value prices, standing to gain should markets reach and surpass the pre-crisis levels – as they have historically.