As investors, we've all heard the saying: markets dislike uncertainty. This rings true because markets reflect the collective actions and emotions of billions of people, and most of us feel more comfortable when we’re in control. The reality is, market outcomes on any given day are largely beyond our control, which can be unsettling, especially during downturns.

Geopolitical events perfectly illustrate this lack of control we have over markets. These events, often driven by political agendas and policy change, can create a whirlwind of uncertainty. Recent trade developments, such as the US announcing and then pausing tariffs on imported goods from Canada and Mexico, serve as a prime example. Let's look at what happened, the emotional rollercoaster it created, and how investors can navigate uncertainty now and in the future.

Tariff announcement overview 

On February 1, 2025, the US announced broad tariffs on several trading partners. For Canadian goods, the rate was significant at 25%, with a 10% rate for energy products. Canada responded by announcing its own 25% tariff on $155 billion worth of US goods. Adding to the unease was the threat of further tariff increases for countries enacting countermeasures.

These developing trade tensions quickly dominated headlines. Financial experts weighed in, generally agreeing that these actions would hurt everyone involved—from consumers, businesses, and investors—and markets reacted with declines.

Then, just as quickly, news surfaced that the tariffs on Canada and Mexico would be paused for 30 days. While the threat of tariffs still remains, this pause offered a welcome reprieve for investors. Markets largely recovered and appear to have stabilized at this point in time. (Read and follow ATB Financial’s The Twenty-Four for additional updates on the tariffs as well as daily economic insights.)  

This is a perfect example of how quickly things can change and how important it is as investors to try and not react to uncertainty. 

The emotional challenges of uncertainty

Investing amidst this kind of uncertainty can be uncomfortable. Markets often experience volatility and declines for valid reasons, and unfortunately, the circumstances causing market distress can often spill over into our daily lives.

For Canadians, the tariff situation was, and remains, a concern. We can appreciate the size and influence of the US economy and how intertwined it is with the Canadian economy. This naturally causes worry about the real-world consequences such as rising prices and job security, along with our investments. 

Intense emotional discomfort can lead to an innate desire to do something—to regain a sense of control. For investors, this might include the temptation to sell off portfolio holdings to avoid a perceived and inevitable market decline. This instinct is natural, but with investing, it can often lead us astray and towards the risky path of market timing. 

The fact that the impending tariffs ended up being paused reinforces the concept of just how uncertain uncertainty can be. Market narratives and our emotions can make it feel like there is a required next step, however, a clear course of action is never available. 

The key to weathering uncertainty and volatility is to do our best to remain level-headed and resist our instinct to act, which is far easier said than done. That's where having a solid financial plan and investment strategies can be crucial.