Markets are volatile: what it means for your investments

If you’ve been following the news lately, you’ve probably noticed a familiar pattern: rising global uncertainty and markets moving more than usual.

So, what’s actually driving these movements? And how should you think about them as an investor?

Markets react to expectations, not events

Financial markets are forward-looking. They move based on expectations, not just what’s happening right now.

Investors are constantly trying to anticipate what comes next. By the time a major event unfolds – whether it’s economic data, geopolitical developments or a policy decision – markets have often already factored in what was expected.

So, what really drives movement is the gap between expectation and reality. If the outcome is better than expected, markets may rise. If it’s worse – or simply different from what investors had anticipated – markets may fall. That’s why markets can drop even when the headlines seem “positive” or remain steady despite negative news.

Why markets are so volatile right now

Uncertainty is rarely good for markets or the economy. And right now, there’s plenty of it.

Geopolitical tensions like the war in Iran can disrupt global supply chains, trade routes and investor confidence. In this case, one of the biggest concerns has been the potential impact on oil supply.

Oil plays a crucial role in the global economy. When supply is threatened, fuel prices tend to rise quickly. That increase flows through to transport and production, which can push up the price of goods and services – contributing to higher inflation. And when inflation rises, central banks may raise interest rates, keep them higher for longer or delay cutting them, just to keep inflation under control.

This creates a more uncertain environment for businesses, consumers and investors.

What not to do when markets are volatile

When markets move quickly, it’s natural to feel the urge to react. But short-term decisions – especially those driven by emotion – can work against long-term outcomes.

Trying to time the market based on headlines and short-term expectations is extremely difficult, and generally not a recommended approach. It can mean missing key moments, both on the way down and on the way back up.

It’s also worth being cautious about reacting to headlines alone. News can amplify concerns or optimism, but it doesn’t always reflect the bigger picture. Often, it’s simply noise.

What to focus on instead

Rather than reacting to day-to-day movements, it can help to step back and refocus on what matters most:

Your goals: What are you investing for? Retirement, wealth building, financial independence? Your goals should guide your strategy.
Your attitude to risk: How comfortable are you with market ups and downs? A portfolio that reflects your risk tolerance is more likely to be one you can stick with during periods of volatility.
Your timeframe: When will you need the money? Short-term market movements tend to matter less over longer investment horizons (10-plus years) as markets have tended, over time, to move through cycles of growth, decline and recovery.

The aim isn’t to avoid market risk altogether, but to manage it. That’s where diversification comes in.

By spreading investments across different asset classes, sectors and regions, you can reduce concentrated risk and position your portfolio for a range of outcomes – so you’re not relying on any single outcome or market movement.

When a review may be helpful

Sticking to your investment strategy is crucial. But staying the course doesn’t mean ignoring change altogether.

There are times when reviewing your plans makes sense – particularly if your circumstances, goals or timeframe have changed. Market events can also act as a prompt to revisit your portfolio and check that everything is still aligned.