A Good Investment Strategy Is Built for Bad News

One of the most common questions I have been hearing in recent conversations is whether investors should continue to own U.S. equities given the current market environment and ongoing geopolitical uncertainty.

Our view remains unchanged: a well-diversified investment strategy should include exposure to high-quality U.S. companies as part of a broader, globally diversified approach.

While some of the largest technology companies that have driven market returns in recent years have experienced periods of weakness, the broader U.S. market has remained resilient. This is an important reminder that market leadership changes over time. Investors are not relying on a small group of companies to drive returns indefinitely. Different sectors and businesses contribute throughout various market cycles, which is why diversification remains such an important part of a long-term investment strategy.

At the same time, investors are understandably focused on recent geopolitical developments. The changing situation in the Middle East and renewed uncertainty following the breakdown of a ceasefire agreement are reminders that markets are constantly responding to new information. These events can create periods of short-term volatility, particularly through energy prices, inflation expectations, and investor sentiment.

Markets are cyclical. Recessions, bear markets, and corrections are not anomalies; they are a normal part of investing. The challenge is not predicting whether they will occur, but when.

Many well-known market commentators have built reputations by correctly identifying risks before significant downturns. However, what is often overlooked is that many of those same commentators have made bearish predictions that did not materialize within the expected timeframe. Eventually, because market declines are inevitable, some forecasts will prove correct.

The challenge for investors is that markets can continue rising for years between those predictions, making it costly to position a portfolio around an anticipated decline. Waiting for complete certainty often means waiting until opportunities have already passed.

As Peter Lynch once said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.”

The catalyst behind every market decline is different. It may be inflation, interest rates, valuations, geopolitical events, or economic weakness. However, the market’s reaction is often familiar. Fear increases, volatility rises, and investors are tempted to make decisions based on short-term uncertainty rather than their long-term objectives.

Successful investing is not about avoiding every downturn. It is about building an investment strategy designed to withstand uncertainty and allowing time, diversification, and discipline to work together.

The goal is not to predict every challenge markets will face. It is to build a strategy that remains resilient through them.

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