The Market Feels Unstable — Here’s How to Stay on Track
There are times in market cycles when economic, geopolitical, and financial conditions converge in ways that create palpable uncertainty. In many ways, it can feel like standing on the precipice of an abyss.
Today, I would argue that we are in just one of those moments.
Often, it’s not just one event, but a cascade of interconnected developments that lead one to conclude that things are about to get bad.
History Often Rhymes
Early on in my career, it started with the failures of Bear Stearns and Lehman Brothers, the nationalization of Fannie Mae and Freddie Mac, and the bailouts of AIG and Citi, all of which signaled the fragility of the global financial system in 2008.
In 2020, early reports of health warnings, travel restrictions, and border closures eventually escalated into a near-total shutdown of the global economy, prompting widespread existential fear.
Now, in early 2025, we are experiencing heightened uncertainty as the resumption of trade wars with ambiguous objectives, shifting geopolitical alliances, and a retreat from post-war global institutions and a seeming move towards isolationism create a new political and economic reality. These shifts pose significant implications for the global economy and financial markets.
Needless to say, there is much to worry about in the current political, economic, and market environment. It’s enough to make any sane person want to bury their savings in their backyard.
How to Navigate the Uncertainty
That said, having been through multiple market cycles, being an avid student of history, and considering my background in macroeconomic strategy, I would like to share some thoughts on how to frame today’s environment and what you can do about it financially.
Firstly, I want to acknowledge that we are in the midst of an anxiety-provoking time in U.S. history. I am not going to discount the legitimate fear that many of us may be feeling right now amidst all the political tumult and economic uncertainties. This is a natural response.
With that said, when it comes to investing and the markets, it’s crucial to remember that we’ve been through similar challenges in the past. And with history as our guide, during times like these, it’s essential to remain committed to a long-term, disciplined investment strategy.
Make no mistake, what’s happening today will have significant implications for years to come.
Why It’s Essential to Stay Committed for the Long-term
However, history has shown that, from a capital markets perspective, risk assets tend to sell off during political and economic inflection points, before eventually recovering. These ebbs and flows are a natural part of the market process when key narratives change.
In fact, over the past 100 years, there have been many paradigm-shifting political and economic events, but stock prices continued to march higher thereafter. This point is evidenced in Figure 1.
To be sure, financial markets, after periods of uncertainty, do eventually recover as investors eventually adapt to new political or economic paradigms. Indeed, as figure 1 illustrates, risk asset prices are naturally biased to the upside because if they weren’t, then investing would not be much different from gambling, would it?
Nevertheless, you might say that now is not the right time to be in the markets and that you would prefer to get out. However, history has also shown us that exiting the markets at the wrong time could lead to major disappointment down the road.
For example, Figure 2 shows how missing even the best five days over the past 20 years could have led to significant missed opportunities in the markets. Indeed, back in 2008, it is arguable that peak market fear occurred at the end of the year, just a few months before the market bottomed out in March 2009.
Similarly, in 2020, peak fear occurred in late February before markets bottomed out in March and then took off again in April. Therefore, trying to time the markets or get out when it feels like things are starting to get bad might work against you over the near- and long-term.
Practical Steps to Take
So then, amidst all of this, what should you do about it all?
Well, in uncertain times, many investors often find themselves torn between taking action and standing still.
Here are six key strategies to consider regardless of where you stand today:
#1 Know Your “Sleep Well Number” (Cash Management)
When it comes to cash management, during times like these, it is crucial to know your “sleep-well” number. Depending on where you are in your retirement journey, having enough cash on hand to cover six to eighteen months of living expenses is something to consider now.
Having this number available will enable you to avoid making knee-jerk decisions with your portfolio, enable you to stay committed to your long-term strategy and avoid selling assets at an inopportune time.
#2 Rebalance Your Portfolio
Rebalancing your portfolio now allows you to take some risk off the table. Markets have rallied handsomely over the past eighteen months, which means that your current holdings are very likely out of alignment with your strategic asset allocation.
Rebalancing includes taking gains from positions that have done well in your portfolio and adding to positions that are underallocated in your portfolio relative to your strategic allocation. This approach ensures that you’re not taking any more risk than necessary with your investments.
#3 Stick to Your Long-term Plan
When in doubt, stick to your plan. Remembering your long-term plan is essential during market uncertainty. That’s because it is easy to become distracted and search for a salve to relieve the unease in the near term when things start going off the rails.
However, it’s crucial to remember that your financial plan was created to help you navigate not just the good times, but also uncertain times like the ones we’re experiencing today.
#4 Reconsider Big-Ticket Purchases
If you are contemplating purchasing a new home, car, or other big-ticket item, you may want to consider holding off on any moves for the next few months. This approach will allow you to preserve cash and ensure that you are not locking yourself into a decision at an inopportune time.
#5 Sharpen Your Pencil
At the same time, it is worth sharpening your pencil. Warren Buffett is known to have said, “Be fearful when others are greedy, and greedy when others are fearful.” Depending on your living situation and cash position, fear-driven market sell-offs often provide opportunities to purchase assets at a discount.
If you are in a solid cash position, keeping an eye out for favorable buying opportunities once we have more clarity on the political and economic environment could be worthwhile.
#6 Consider Tax Planning Opportunities
Finally, market sell-offs also present an opportune time for tax planning. And a key tax planning approach includes completing a Roth conversion. That’s because lower portfolio values often translate to lower taxable values. Remember, Roth conversions are not just a fourth-quarter tactic but a year-round opportunity.
Similarly, market downturns can present opportunities for tax-loss harvesting. This approach involves selling stocks at a loss and buying a similar but not identical asset. Even if you do not have gains to offset the losses, you can carry forward the losses as a tax asset to offset future capital gains.
The Big Takeaway
When it comes down to it, the big takeaway from an investment perspective is to stay invested for the long term even though the near term seems so uncertain. While we may be headed for a dark period in the months ahead, I am reminded of how essential it is to remain optimistic.
Viktor Frankl, a Holocaust survivor and author of the book, “Man’s Search for Meaning”, points out in his work that those who adapted and sought meaning in each moment, especially in trying times, had greater ability to endure trials and uncertainty than those who did not.
Make no mistake, we are likely headed for some very trying times in the weeks and months ahead. From a political and social perspective, we do not have a roadmap for navigating what lies ahead, which means we will have to take things one moment at a time. As difficult as that may be, however, finding purpose and direction in uncertain times has always been a defining trait of those who successfully emerge from such events.
What’s more, from a financial perspective, history has repeatedly shown that uncertain times like these often create opportunities for those who stay the course. That’s why having a solid financial plan and a disciplined investment strategy is essential now more than ever. While the near-term outlook may be uncertain, remaining objective and committed to a well-thought-out financial plan continues to be the best way forward.