Tariffs imposed last week by U.S. President Donald Trump have triggered a drop in stock markets, including a sharp decline in U.S. pre-market trading. The Dow Jones Industrial Average fell by 5.5 percent, the S&P 500 by 5.79 percent, and the Nasdaq by 5.82 percent.

The index decline also affects Estonian investors, including those who have invested in pension funds.

"The whole idea of an index fund is that it moves with the markets, when markets rise, the returns of index funds rise; when, as is currently the case, markets fall for three or four days in a row, index funds fall as well," said economist and LHV macroanalyst Triinu Tapver.

"If we look at it from a long-term 10 – which is the whole point of an index fund, ideally staying invested for t1en years or more – and if we look back at the financial crisis of 2008-2009, then by today, those returns have been more than recovered," she added.

In Tapver's view, someone who has invested in index funds with a long-term perspective should not take any action right now.

"The worst-case scenario would be if they started selling from the bottom of the market. You can never predict financial markets, when a shift upward or downward will occur," the economist said.

Tapver said forecasts go in all directions.

"If you look at U.S. stock markets, they tend to move in step with the economy: the tariffs imposed by President Donald Trump have dragged the markets down, and major banks are estimating a 40 percent likelihood of a U.S. economic crisis. This means that stock markets are reacting in advance. When the turnaround might happen is hard to say in the current highly uncertain geopolitical situation, because we cannot predict what Trump will do tomorrow, or what China and Europe will do," she added.

The economist said the most reliable strategy is to follow the market through its ups and downs.

Speaking about pension funds, Tapver said if retirement is 10 or more years away, there is no reason to take immediate action.

"I am not worried at all right now. I have researched this academically, and in 98 percent of cases, index funds outperform actively managed funds. That has historically been the case and is expected to remain so. It might be tougher for those who are approaching retirement within the next year, because their most recent investments were made at high prices. They may have more reason for concern, but even then, I would not say it is that serious. Looking at the last five years, we are still in the black with stock markets," said Tapver.

Kristjan Hänni, portfolio manager and board member at Kawe Kapital, said if an investor sees indexes as more of a trading instrument in their portfolio and believes they have the necessary experience, then they are free to go ahead and trade.

"A long-term investor in stocks or indexes should be prepared for such risks of decline and does not need to react to such events. For quite some time now, at least in developed markets, these sharper drops have tended to stop around a 20-percent decline, followed by fairly rapid market recovery," he said.

"The old-school investor in me still remembers earlier times when a steep initial drop was followed by a bit of a recovery and then, about a month later, the markets tested the lows again. There is no doubt that markets could develop in various directions right now, and this will accordingly impact pension funds," Hänni said.

Hänni also mentioned that he bought an S&P 500 index fund, but stressed that it was his own decision and not something he could recommend to others.

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