Recent developments in the Middle East have attracted global attention. Geopolitical events can create uncertainty, and financial markets often respond quickly to such news.
Over the past week, oil prices have risen and share markets have experienced increased volatility. These reactions are typical when uncertainty enters the global environment. While markets may move in response to headlines, the broader financial system remains stable.
Why markets react to global events
Financial markets are influenced by expectations. When geopolitical tensions rise, investors reassess potential risks to global trade, supply chains, and economic growth. This can lead to short-term movements in share prices, currencies, and commodities such as oil.
Initial market reactions are often driven by sentiment and uncertainty rather than long-term changes to economic fundamentals.
For investors, it is important to recognise that short-term market fluctuations are a normal part of investing.
Volatility is a normal part of investing
Periods of market ups and downs are expected throughout any long-term investment journey. Economic cycles, global events, and policy decisions all influence markets at different times.
Well-constructed investment portfolios are designed with this in mind through diversification across:
- Asset classes such as shares, bonds, and cash
- Countries and regions
- Sectors and industries
Diversification does not eliminate market movements, but it can help reduce the impact of volatility in any one area and support a more balanced investment approach over time.
Avoid making emotional decisions
When markets move suddenly, it can be tempting to react quickly. However, selling investments during periods of decline can lock in losses and reduce the potential to benefit when markets recover.
Historically, markets have recovered from periods of uncertainty. Investors who remain focused on their long-term goals are often better positioned than those who attempt to time short-term market movements.
If your financial goals, time horizon, or personal circumstances have not changed, maintaining your investment strategy is usually the most appropriate course of action.
Reviewing your investment strategy
Short-term volatility can also serve as a reminder to review your investment plan. Consider:
- Is your current investment strategy aligned with your long-term goals?
- Are you comfortable with the level of risk in your portfolio?
- Is your investment strategy still appropriate for your stage of life?
Regular reviews can help ensure your investment approach remains aligned with your objectives as markets and personal circumstances evolve.
Speak with an adviser if you have questions
If recent market movements have raised questions about your investments or KiwiSaver account, speaking with an adviser can provide clarity.
Our investment advisers can help you understand how current market events may affect your portfolio, review whether your strategy remains appropriate, and discuss any adjustments that may be worth considering based on your personal goals.
If you would like to discuss your investments or KiwiSaver account, please complete the contact form below to speak with an Apex Advice adviser.
Please provide your contact details in the form below and one of our financial experts will call you within 24 hours. "*" indicates required fields
How can we help you today?
