written by Tony DiBartolomeo, DWA Portfolio Manager
Recent geopolitical developments, including tensions surrounding Iran, have contributed to increased market volatility in recent weeks. While periods of uncertainty can feel unsettling, it is important to remember that market fluctuations are a normal and expected part of investing.
Throughout history, markets have faced many challenges—wars, political crises, financial downturns, and global pandemics. Despite these events, long-term investors have historically been rewarded for remaining disciplined. The chart above highlights how markets have continued to grow over time even as they navigated numerous global events.
Similarly, the chart “A History of Market Ups and Downs” demonstrates that while market declines do occur, bull markets have historically been longer and significantly more powerful than bear markets. In other words, the long-term upward trajectory of markets has outweighed the temporary downturns investors experience along the way.
Because of this reality, our investment approach focuses on maintaining diversified portfolios designed to participate in long-term market growth, rather than attempting to predict short-term market movements. Attempting to move in and out of markets based on headlines can often result in missing the recovery periods that historically drive a significant portion of long-term returns.
Another important component of portfolio construction is liquidity planning. We carefully evaluate expected cash needs and maintain allocations to money market funds and high-quality fixed income investments. This structure helps ensure that near-term spending needs can be met without requiring the sale of equities during periods of heightened market volatility.
Periods like the one we are experiencing today can test investor patience, but they also highlight the value of a disciplined investment plan. By remaining diversified, maintaining appropriate liquidity, and focusing on long-term goals, investors are well positioned to participate in market recoveries and long-term growth.
