Stock markets in the US fell sharply on Monday, with worries about the economic impact of President Donald Trump’s tariffs thought to be behind the dip.

The S&P 500, a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States, was down over 8 per cent at close on Monday compared to its all-time high in February.

The Nasdaq, which focuses more on technology stocks, also dipped, as did Asian markets at Tuesday opening.

Many people in the UK will have investments exposed to the US, and pensions are no exception to this.

So why are stock markets falling, how could it affect UK retirement savers, and what should they do in reaction to it? The i Paper explains below.

The President has imposed and threatened tariffs – tax on imports – on various countries, with many sticking retaliatory tariffs back on the US.

These tariffs can damaging for businesses, as they cause extra costs.

Lindsay James, investment strategist at Quilter, said: “It had been widely expected that Donald Trump’s policies, whilst widely trailed in his election campaign, would in reality be watered down in order to maintain a business-friendly environment conducive to ongoing gains in the stock market.

“However, the reality so far has been quite different, with on again/off again tariffs and no clear lines of negotiation, all perhaps designed to support his broader goal of seeing a manufacturing resurgence in the US.”

Do US stock markets impact UK pensions?

Many people with pensions will find that their cash has some exposure to companies listed on US stock markets, which could be negatively affecting the size of their pension savings at the moment.

“Most people will be in automatic enrolment default funds which should have global exposure – although clearly the US is a big part of the globe,” said Tom Selby, director of public policy at AJ Bell.

He also said that people who had self-invested personal pensions (SIPPs) may have a large allocations of technology stocks in the US.

David Gibb, chartered financial planner at Quilter Cheviot, added: “Many UK pension funds have significant exposure to US equities.

“In recent times, the US market has been the engine of growth for pension funds, largely driven by the performance of the Magnificent Seven tech stocks.”

What should pension savers do?

Exactly how you should react to the stock market fall as a pension saver depends on multiple factors, including your age and your exposure to US stocks.

But experts generally agree the key thing is not to panic.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: We will all experience periods of stock market turbulence during our pension saving journey.

“In recent memory we have seen this with the Russia/Ukraine conflict and the Covid pandemic. Making knee-jerk reactions such as changing investment strategy or cutting back on contributions can crystallise losses and make it harder for your fund to recover.”

Experts say that general guidance going forwards is to make sure that your pension is spread across lots of different markets.

“It is crucial that portfolios are not overly concentrated in a small handful of names. Such concentration can lead to outcomes that cause discomfort, especially during market downturns,” said Gibb.

For those closer to retirement, there may be a different strategy.

Many with their money in default funds will find that their provider automatically moves their cash to reduce the risk, which Gibb said may make the downturn “less severe”.

Morrissey said: “If you are coming up to retirement then you may choose to put off taking an income from your pension until the situation is more settled. It could also prove a further incentive for people to lock into a guaranteed income for life through an annuity.”

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