'The most important quality for an investor is temperament, not intellect' — Warren Buffett

This statement becomes particularly timely as the uncertainty surrounding tariffs and volatility in North American markets is causing some investors to question their commitment to long-term investing.

After 2 strong years of stock market returns, this recent bout of market volatility may feel particularly unsettling for investors. And given some of the fast-moving news headlines over the last few weeks, I can appreciate why some investors may feel anxious.

While corrections can be unnerving, they have historically been a normal part of investing. Since 1980, the S&P 500 has experienced a drop of 5% or more in 93% of calendar years and has experienced a drop of 10% or more in 47% of calendar years. Despite those frequent declines, the market’s average calendar-year return over the same period has been 13.3%.

It may also help to remember that markets can react to news headlines and emotions in the short term (after all, bad news sells), but over the long run, stocks usually rise if corporate profits are growing. Corporate profits rose about 14% during the fourth quarter of last year and are expected to experience further growth in 2025, based on analysts’ estimates.

While it can take nerves of steel not to react when stocks are falling, this has often been the best course of action. As an investor, understanding key market data can strengthen our psychological resilience during periods of market stress. According to a study by J.P. Morgan, seven of the stock market’s best days over the past 20 years occurred within just 15 days of one of the market’s 10 worst days. This means that the market’s worst days and best days are clustered together.

The implications of missing the best days are startling. The chart below illustrates that if an investor misses just the 10 best-performing days, they would have received only a 7.44 percent average annualized return compared to 10.38 percent for those who didn’t try to time the markets. This stark contrast highlights why being disciplined during times of market volatility can significantly impact whether someone meets their financial goals or falls short of them. Investors who sell, in an attempt to head off further losses, risk locking in potential losses and often miss out on the market’s subsequent recovery.

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It’s impossible to say how long it may take for stocks to recover their previous highs and for volatility to subside due to the complexity of the economic factors at work and the inherent unpredictability of future events, but historically, market corrections tied to trade uncertainty have historically rebounded once policy clarity improves.