Why Investors Should Avoid Emotional Decisions During Market Volatility

A Look at Tariffs, Global Conflict, and What It Means for Long-Term Investors

Markets rarely move in a straight line. Periods of volatility are a normal part of investing, especially when global headlines dominate the news cycle.

In our latest Monthly Market Commentary, Fiat Wealth Management CEO Brad Gotto sat down with Tim Holland, Chief Investment Officer at Orion / TownSquare, to discuss several topics currently influencing markets, including tariffs, global conflict, interest rate expectations, and shifting leadership within the stock market.

While headlines can feel dramatic, they often highlight an important reminder for investors: successful investing is rarely about reacting emotionally to the news of the day. Instead, it is about maintaining a disciplined strategy designed to navigate both positive and challenging market environments.

Below are several key insights investors should understand during periods of uncertainty.

Why Market Volatility Happens

Market volatility refers to periods when asset prices move more rapidly than usual, either upward or downward.

These movements are often triggered by new information that may affect economic expectations, such as:

• Changes in government policy or tariffs
• Global conflict or geopolitical tension
• Interest rate decisions from the Federal Reserve
• Inflation data and employment reports
• Shifts in corporate earnings expectations

In the March market commentary, Brad and Tim discussed how multiple factors are currently influencing markets simultaneously, including tariffs, geopolitical developments involving Iran, and uncertainty surrounding interest rate policy.

When several economic forces occur at the same time, markets may become more volatile as investors reassess risk and future economic growth.

However, volatility itself is not unusual.

Historically, markets have experienced many periods of uncertainty, including recessions, geopolitical conflicts, and policy changes. Yet over long time horizons, diversified portfolios have generally continued to participate in long-term economic growth.

The Hidden Risk of Emotional Investing

One of the most common challenges investors face during volatile markets is the temptation to react emotionally.

Emotional investing often occurs when investors make decisions based on fear, panic, or short-term headlines rather than a long-term strategy.

Common examples include:

• Selling investments after markets decline
• Moving entirely to cash during periods of uncertainty
• Chasing investments that recently performed well
• Abandoning diversification in pursuit of short-term returns

Ironically, these reactions can sometimes lead investors to sell assets that are temporarily down and buy assets that have already risen.

During the commentary discussion, Tim Holland noted that while large technology stocks have recently faced pressure, other areas of the market have held up better, highlighting the value of diversification across asset classes.

This type of market rotation is not unusual and is one reason long-term portfolios are typically designed with multiple asset classes rather than concentrated exposure.

Why Diversification Still Matters

Diversification is a foundational principle in portfolio construction.

Rather than relying on a single sector or asset class, diversified portfolios spread investments across different areas of the market.

These may include:

• U.S. large-cap stocks
• Small-cap companies
• International equities
• Fixed income investments
• Alternative asset classes

As discussed in the March market commentary, some areas of the market have remained positive even while headline indices experience volatility.

Diversification cannot eliminate risk, but it can help reduce the impact of volatility in any single part of the market.

Why Long-Term Strategy Matters More Than Headlines

Markets respond quickly to new information. Headlines often focus on immediate events because they attract attention.

However, long-term investment success is typically driven by factors such as:

• Economic growth
• Corporate innovation
• Global productivity
• Long-term earnings expansion

While short-term events may create temporary uncertainty, disciplined investors often benefit from maintaining a strategy aligned with their long-term goals.

Financial plans are typically designed with the understanding that volatility will occur periodically. The goal is not to predict every headline, but to build portfolios capable of navigating different market conditions.

The Purpose of Fiat’s Monthly Market Commentary

The purpose of the Monthly Market Commentary is to provide perspective during times when headlines may feel overwhelming.

Each month, Brad Gotto and Tim Holland discuss:

• Key economic developments
• Market trends and data
• Policy changes that may affect investors
• Long-term investment perspectives

The goal is not to predict short-term market movements, but to help investors better understand the environment and remain focused on thoughtful financial planning.

Final Thoughts

Periods of uncertainty can feel uncomfortable for investors. However, volatility is not a new phenomenon in financial markets.

History has shown that disciplined investment strategies, diversification, and long-term planning can help investors navigate changing market conditions more effectively than emotional reactions to short-term news.

Staying informed is valuable. Staying disciplined is essential.

Sources

Orion Advisor Solutions / TownSquare Capital – Market Commentary Discussion
Federal Reserve Economic Data (FRED)
U.S. Energy Information Administration (EIA)
U.S. Bureau of Labor Statistics (BLS)

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