The Power of Patience and Perils of Overreaction

Investors who stayed patient and didn’t sell after “Liberation Day” have been rewarded. The 90-day pause on tariffs and Middle East tensions will further test investor patience.

The Power of Patience In the weeks following the “Liberation Day” tariff announcements, I wrote a series of columns urging investors to be patient and measured when it came to ‘responding’ to the punitive trade measures. Here’s an excerpt from one of those columns: “Selling out of the market today [April 5] substantially increases the chances of being whipsawed when a rally takes hold, which again, no one can know the precise timing of. In the current environment, the setup is that any modicum of good news on trade will factor as a positive surprise for markets going forward, which will almost certainly trigger strong moves higher. Long-term investors simply cannot afford to miss these upswings.” It paid to be patient. As I write, the S&P 500 has staged a sharp v-shaped recovery, effectively erasing all the tariff-related losses of the past few months. For any investor who tried to time the declines and the powerful bounce that followed, there was basically no margin for error. The entire event unfolded too quickly and was—and still is—mired by uncertainty, which meant there was no clear signal for when stocks would rally. There rarely is. What the Market’s Comeback Signals for Your Next Move The tariff headlines came fast. The rally came faster. And for those who tried to make moves in the middle of it all, there was almost no margin for error. Our June Zacks Stock Market Outlook 1 breaks down what really drove the market's sharp rebound—and what it could mean for the next phase of this cycle. Inside, you’ll find: Asset allocation guidelines for today’s market environment. Expert forecasts for inflation, rates, and economic trends. Industry tables and rankings to help you spot opportunities. Buy-side and sell-side consensus insights at a glance. And much more! If you have $500,000 or more to invest and want to take charge of your financial journey, click the link below to get your free report today! IT’S FREE. Download our Exclusive June Zacks Stock Market Outlook Report 1 Looking ahead, I don’t see a ‘clear signal’ appearing anytime soon. The “modicum of good news on trade” came in the form of a 90-day pause on reciprocal tariffs, which expires very soon on July 9. With just weeks left to go, there are still dozens of trade deals in the works, with the U.K. being the only developed nation with an inked agreement. I feel comfortable predicting that there is essentially zero chance all the deals will be done by the deadline. Whatever happens on July 9, my message is the same as it was before: investor patience will be required. This is especially true as the situation in the Middle East continues to escalate. Geopolitical tensions seem to have only gotten worse in the past year, which adds oil markets and global economic growth to the list of concerns alongside trade. Over the past few weeks, oil prices have jumped substantially, and escalations between Israel and Iran have only added to those pressures. Equity markets are not immune from these pressures, but there is also a long history of regional conflicts, and in particular conflicts involving the Middle East, having a muted impact on global growth or the trajectory of equity markets. Of all the wars and conflicts of the last 75+ years, only World War II resulted in a bear market. The fighting between Israel and Iran is very unlikely to spill over into major economic centers, like the U.S., Europe, Japan, and China. From the perspective of oil markets, it is important to note that Iran produces a little over 3 million barrels per day of oil, which is about 3% of global daily output. That’s not insignificant, but it’s also true that because of Western sanctions, about 90% of that oil gets exported to China. Saudi Arabia and other OPEC+ countries have plenty of spare capacity to make up for any hit to global supply, which they would likely do if prices continued to rise. I do not mean to write-off the conflict in the Middle East as a non-story. Geopolitical crises and wars profoundly impact the daily lives of affected civilians, global stability, trade, and so on. But a global recession requires trillions of dollars' worth of damage to the global economy, which current crises do not seem capable of delivering. S&P 500 companies earn less than 1% of revenue from the affected regions., which includes Russia and Ukraine. Market volatility may continue if the conflicts escalate, and news coverage will almost certainly be constant. But investors would be wise to foresee this environment for the next few months, or perhaps longer, and try to remember that the desire to react to a crisis is almost always counterproductive and costly. Now is a time to remain patient and focused on U.S. economic fundamentals, which I think continue to prove stronger than appreciated. Bottom Line for Investors Recent months have shown just how quickly markets can recover and how costly it can be to second-guess during times of volatility. As trade negotiations remain unresolved and geopolitical risks linger, the urge to act on headlines will be strong. But the fundamentals remain intact, and history reminds us that even serious conflicts rarely derail global growth for long. For investors, the real risk lies in overreacting to noise rather than staying focused on the bigger picture. That’s why perspective matters. Instead of reacting to headlines, focus on the fundamentals and long-term trends shaping the market. Our June Stock Market Outlook Report 2 reveals the key risks and opportunities ahead, helping investors cut through the noise and stay prepared in a volatile environment. Inside, you’ll find: Asset allocation guidelines for today’s market environment. Expert forecasts for inflation, rates, and economic trends. Industry tables and rankings to help you spot opportunities. Buy-side and sell-side consensus insights at a glance. And much more! If you have $500,000 or more to invest and want to learn more about these forecasts, click the link below to get your free report today! About Zacks Investment Management Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. 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