Market Volatility: It’s Not New

Look at the charts. The Australian Stock Market Index (ASX200) or the S&P 500 have both taken a hit recently and recovered i.e. bounced. In fact, if you just glanced at the last few months, you might think the sky is falling.

But zoom out to five or ten years, and the picture changes completely. The recent ‘plunge’ is barely a blip. We’ve seen far worse – the COVID correction, for example, saw a dropping +35% wiped of the Australian share market in as little as a month. Yet the markets recovered.

The lesson? Corrections are part of market cycles. Booms are followed by busts; busts are followed by booms. Every time. But what’s not predictable is exactly when those turns will come. That’s why trying to time the market based on headlines is one of the fastest ways to consistently loose money.

Australian Stock Market Index (ASX200 10 Years)

S&P 500 (10 Years)

Trump, Tariffs, and Troughs

Sequence risk is a concept that becomes critical as you approach and enter retirement. It’s all about the order of returns and whether you’re adding or subtracting from your balance. When you’re younger in the accumulation phase and adding funds, a market correction doesn’t have the same impact on your savings as your balance is generally smaller, and there is time to recover and grow. But once you’ve built a significant nest egg, the stakes become much much higher. Even a modest negative movement e.g. -5% x $1m = -$50,000 could shorten the longevity of your capital by 2-3 years.

I often talk to clients about “paper profits.” That’s the unrealized (capital) profit in their portfolio. It’s not real in the sense you can’t spend it until you turn it into money. Worse still if you leave paper profits in place there is a chance they can be lost with a market correction. Quite simply, the larger the balance the larger the potential decline in paper terms.

Changing Strategy 5 Years Out

If you’ve done well in investment markets leading up to retirement, fantastic, but it may be time to ‘harvest’ some of those paper gains by converting them into defensive assets like bonds or cash. This may involve shifting part of your portfolio to a more conservative mix, but beware this may have tax consequences so get some advice first.

This strategy helps reduce late-term loss of capital by reducing exposure to market fluctuations. It’s all about reducing the risk of losing some of that hard earned wealth in an attempt to gain a just little more growth.

Influencers, Journalists, and the Compliance Gap

If you’re relying on a journalist with perhaps limited real world (financial) experience —or worse, a YouTube influencer with no financial substance / credentials—to guide your investment strategy, you’re playing a very dangerous game with your financial future. And most importantly you won’t know this until you reach your time horizon and realize that one of your most valuable wealth creation tools (time) has been lost/squandered.

As a financial planner, I can’t comment on or publish an opinion without first having a compliance team review and approve my comments. Everything needs must be factual and not presented in a way that would influence a person’s actions. But financial media and influencers are under no such limitations.

Logic vs Emotion: Long-Term Thinking Wins

This is where we need to separate logic from emotion. Investors are human and hence are emotional. We’re hardwired to avoid losses more strongly than we’re driven to make gains. Behavioral economists call it ‘loss aversion.’ You feel the pain of losing $1,000 twice as much as the joy of gaining $1,000.

That’s why so many of us sell out of markets into cash when markets fall significantly —only to buy back into those markets once they have recovered. Effectively selling low and buying high. This is the opposite of long-term wealth creation.

Instead, we need emotional resilience by allowing for and expecting market corrections as a normal part of investing. Commonly known as volatility. In a lot of respects this volatility is one of the key drivers of wealth creation. However, we need to keep in mind that everyone is different both emotionally and situationally. If you’re a young investor your strategy is very likely to be different to that of an older investor.

Age Matters – Context is Everything

A one-size-fits-all financial commentary is useless. A 20-year-old for example may have a lot less invested i.e. at risk than an older person. Why? Because they’ve got potentially 40+ years of compounding ahead of them. Even if their investments were to halve in value, they have time to recover and grow their balance.

However, at 40, they may be trying to balance mortgage repayments, raise kids, and investing for the future. And at 60, with retirement looming on the horizon, they’re likely to be focused on capital preservation, stable income, and avoiding forced sales. Their strategies are likely to be very different.

So when you read an article suggesting ‘now’s the time to get in or out of the market,’ ask yourself: for whom? A 65-year-old retiree? A 25-year-old? Someone investing $500,000, or someone just starting out with $5,000? Context is everything and everyone is different.

The Media Shouldn’t be Your Financial Planner

Financial journalism can be informative. But it’s not advice. And it’s not tailored to *you*.

Remember: the loudest voices in the media aren’t regulated financial professionals. They’re paid to provoke emotion, not to provide sound financial strategies. When you see a headline like ‘Billions wiped off the market,’ that’s designed to generate fear, not understanding. Yes its likely to be factual but it’s presented in such a way to elicit a reaction.

Investing is not about headlines. It’s about timelines.

So What Should You Do? Here’s what I tell my clients:

1. Stick to your plan. If you don’t have one, get one.
2. Don’t react to noise. React to your life goals and time-horizon.
3. Diversify. Own a mixture of assets that reflect your objectives, circumstances and preferences.
4. Rebalance. When your portfolio has increased or decreased, look to adjust investments in-line with your objectives.
5. Review regularly. At least yearly and not with every news headline.

Because in the end, it’s not about what Trump does, or what the media says—it’s about how you *stay the course*.

Disclaimer

People & Partners Wealth Management Pty Ltd ABN 67 127 250 613 is a corporate authorised representative of Fortnum Private Wealth Ltd ABN 54 139 889 535, holder of Australian Financial Services Licence (AFSL) No. 357 306. The content of this article is for general informational purposes only and does not constitute personal financial advice. It does not take into account your individual objectives, financial situation, or needs. Any advice we provide will be detailed in a formal advice document. The opinions expressed in this article are those of the authors at the time of writing and should not be taken as a recommendation to act. To the extent permitted by law, Fortnum Private Wealth Ltd and its associates accept no liability for any loss or damage incurred as a result of reliance on this communication.