March and April of 2025 were wildly volatile in investment markets. This was mainly due to news about tariffs that the US wanted to impose on goods imported into America and the threat of a break-up of the Government of National Unity in South Africa. There were times when the US stock market fell by more than 6% in a day, followed by a 9% jump the following day. How do investors make the right decisions when markets can reverse course based on a midnight social media post? You need to find ways to operate outside of the madness of crowds so that you can build and protect your wealth.
Prepare yourself, the noise is going to be louder for longer
We all hope for stability and certainty. Unfortunately, we will face ongoing uncertainty for at least a few months, possibly another year or more. It takes time for markets to adjust to the new normal, and Trump will likely keep everyone guessing throughout his presidency. We must accept this and expect prices to normalise in future, once investors have become accustomed to his unpredictability. Consider taking advantage of significant market drops to gradually phase in stock market purchases. Waiting for politicians to improve their behaviour is not an option; markets are forward-looking and will recover much faster than you can anticipate.
Unpredictability has become predictable.
Reflecting on the South African political landscape, the likelihood of a stable coalition government that works seamlessly for the remainder of this administration is extremely slim. Instead, we can expect disruptions and showmanship as politicians compete for attention while catering to their backers and political leaders. Investors should recognise that even amid instability, investment opportunities exist. You can capitalise on this volatility by buying during price dips and holding onto your investments through turbulent times.
Zoom out
When you see hysterical headlines that a share or a market has dropped by 15% in two weeks, take a moment to zoom out and look at the longer-term picture. If the headlines tell you that a share has lost over a trillion dollars in value in a month, what is the growth over 12 months? You might find the share is still up 12% over the year, even after it has dropped 15% in the last two weeks. In addition, how will the operations of the company be affected by a drop in the share price? Does it have any debt, or is it holding a large amount of cash? Management might decide to use some of the cash to buy back shares after a significant drop; this is very beneficial to those who remain invested. Your dividends will rise, which could spur a recovery once the market rebounds from anxiety-driven price drops.
You, me and everyone else cannot predict what is going to happen
You can beat the markets by realising that you don’t know what will happen next. Avoid getting trapped in a spiral of negativity caused by social media. Forwarded messages on WhatsApp are not beneficial. Once you understand that you don’t know what the future holds, you can stop checking the news every hour and focus on more constructive actions. If we are going to face significant uncertainty for a year, consider using market downturns as opportunities to buy if you have extra money to invest. If you are fully invested, stop worrying about the markets and politicians; you can do nothing to change their behaviour. You can ensure that you weather the storm. If you recognise that the future is uncertain, you should not assume that everything will be worse than it is now. History shows that markets generally rise while investors remain depressed. If you operate with tunnel vision, failing to allow for the possibility that conditions can improve, you will limit your ability to grow your capital in the future.
Conclusion Private investors have a considerable advantage over professional investors. We can define our investment time horizons, allowing us to maintain a long-term focus while others are panicking and reacting to WhatsApp messages or social media posts on an hourly basis. If you remember this advantage when others lose their cool, you will make better decisions and give yourself the best chance to build and protect your wealth.
