Investors should ignore the extremes of market movements and stick with a portfolio based on rational decision-making during the current period of rapid global change, according to senior executives at a leading investment firm.
American Century multi-asset strategies chief investment officer Rich Weiss said the first half of the year has thrown up many events that could lead investors to abandon discipline and engage in reactive behaviour.
“As we enter the second half of 2025, it seems like we have experienced more economic upheaval, uncertainty and market volatility over the past six months than one would expect over an entire year or more,” Weiss said.
“The data supports this impression as the level of economic policy uncertainty in the US is now in uncharted waters.”
American Century chief investment officer Victor Zhang added that while a broad view of markets shows some continuity, those who responded to daily movements would have had a rough ride in recent months.
“If you had taken a sabbatical and gone off the grid during April, you would have come back to find little change in the value of the S&P 500 Index,” Zhang said.
“You missed a sharp decline, an equally sharp rebound and news headlines that might have tempted you to do the wrong thing with your portfolio.
“The challenge in this environment is remembering that uncertainty isn’t the same as a negative outcome. Rather, it means there’s a broader range of potential outcomes, and not all are bad.”
Adding to this, Weiss pointed out a growing divergence between hard data, such as employment and inflation figures, and soft data, such as consumer sentiment and expectations.
He noted these data sets can create a case for a bullish or bearish outlook on markets, with the first driven by strong labour markets and retail sales alongside healthy durable goods orders, while the latter has worsening consumer confidence and pessimistic manufacturing outlooks.
“The soft data points to a recession, while the hard data assumes the bull case holds up. Extreme readings from the soft data could be overblown or prove to be prescient, foretelling a significant weakening in the hard data,” he said.
Zhang said given this environment, investors should stick with the long-standing principle of patience and holding on to a well-thought-out plan.
“Recent market activity has shown us how a properly balanced portfolio can take advantage of short-term noise. Diversification, not market timing, may be the best defence against heightened uncertainty,” he said.
“The first half of the year’s volatility and shift in market leadership again reminded us of the benefits of taking a long-term view and removing emotion from our decision-making.”
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