Focus on What’s Real, Not the What-Ifs

The heightened level of transparency from the Trump administration has significantly increased market volatility. Sure, it’s interesting to follow events in real-time, but there’s something to be said for negotiating trade and peace behind closed doors. Jittery markets would much rather be presented with the final outcome once each deal or diplomatic agreement is concluded.

Investors are watching deficit challenges, looming government shutdowns, trade wars, and deregulation unfold under a 24-hour president who isn’t shy about using social media. As a result, the markets are often unsure whether to be optimistic or fearful.

Because markets are now experiencing a play-by-play of every White House initiative, we’ve seen an unprecedented rise in “what ifs.” These range from economic concerns—What if the current wave of tariffs leads to inflation? —to politically charged fears—What if Trump disrupts world order and triggers economic and market collapse?

Let’s add a few more to the fire:
• What if there’s a government shutdown?
• What if war escalates in the Middle East or Ukraine?
• What if Iran obtains a nuclear bomb?
• What if government layoffs trigger a recession?
• What if we can’t control the national debt of $36.22 trillion?

Are you looking for a shovel yet to start digging a hole in the sand?

Whether your “what ifs” are economic, political, or a combination of both, the underlying reality is that nobody knows the endgame to these issues. Focusing too much on hypotheticals can lead to indecision, emotional investing, and missed opportunities. While risk management is important, most “what ifs” never materialize.

Markets are always filled with predictions of doom and euphoria, but extreme scenarios rarely play out as expected. Reacting to every potential crisis often results in excessive trading or falling into the trap of market timing. Trying to predict downturns or waiting for the “perfect” moment to invest can leave you sitting on the sidelines while the market continues to grow. Staying invested and making adjustments based on actual data leads to better long-term returns.

Investors need to react to what’s real. Many people allow their biases to override facts, preferring to dwell on “what ifs” because the actual truth has yet to be determined. Until then, their concerns feel valid.

History shows that markets reward rational investors. Despite wars, recessions, interest rate hikes, and pandemics, markets have historically trended upward. Investors who ignore the noise and stick to their strategies often fare better than those who panic over potential crises.

It’s good to consider risks, but it’s more important to base investment decisions on what is happening, not what might happen. Today, transparency moves at real-time speed, and both positive and negative developments emerge long before outcomes are finalized.

I was traveling recently, and while waiting for my flight, the U.S. announced additional trade tariffs on Canada. By the time my plane landed, Canada had retaliated with new tariffs on the U.S. By the time I found my driver at arrivals, Canada had rescinded those newly placed tariffs. And by the time I got home, we were back to where we started.

This is why investors should focus on what is has happened rather than what might be—because much of the noise turns out to be just that: noise.

For the “What-Ifers,” Here’s Something Else to Ponder:
• What if half the tariffs being discussed are merely bargaining chips that will ultimately be rescinded to create more balanced global trade?
• What if the combination of reduced energy prices, lower interest rates, and deregulation offsets inflation concerns?
• What if manufacturing jobs return to the U.S.?
• What if there’s a peace agreement between Russia and Ukraine?
• What if the recent 10% corrections in the NASDAQ and S&P 500 were simply necessary market resets?
• And what if…it’s never really as bad as it seems?

Fun Facts:
• Since the end of WWII, the stock market has experienced a 10% correction approximately every 19 months.
• Until this recent correction, the last 10% market drop was in October 2023.
• Over the past two years, the stock market delivered a cumulative return of 51%, making it ripe for a pullback.
• There have only been two other instances of back-to-back two-year returns at this level:
o 1995/96 (~54%)
o 1997/98 (~57%)
• Just like back in the dot com 1990’s, trees don’t grow to the sky. Corrections are normal and needed.
• The average recovery time for a 10% market correction is just 4-6 months.
So, before you let the “what ifs” control your investing decisions, remember this: markets thrive on uncertainty, but long-term investors thrive on discipline. In the spirit of Saint Patrick’s Day I will end with a favorite Irish saying. “Worrying is like paying a debt you don’t owe.”

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