5 Ways to Deal With Market Uncertainty

Witnessing your portfolio’s value plummet can be unsettling or, at times, even terrifying. Market uncertainty, however, is inevitable. Economic shifts, interest rate changes, and global events can send markets swinging, impacting your investments overnight.

While you can’t control market movements, you can manage how you respond. In this article, we’ll outline five key strategies to help you stay level-headed and navigate economic uncertainty with confidence. You’ll also read insights from financial advisors who have assisted clients through turbulent markets.

1. Prioritize Logic Over Emotion

During periods of market uncertainty, it’s easy to let emotions drive your decisions. Watching your portfolio value’s drop can trigger a powerful reaction—fear. Unfortunately, this often leads to rash choices, such as panic-selling investments at a loss. These knee-jerk decisions can have lasting consequences, potentially derailing both your immediate financial standing and long-term investment goals.

“The biggest mistake I see investors make during periods of market uncertainty is reacting emotionally and making impulsive decisions, such as panic selling or trying to time the market,” explains Jake Falcon, CRPC^™, CEO at Falcon Wealth Advisors. Seeing your investments drop in value can lead you to believe you should change course, however, this “can lead to significant losses and missed opportunities for recovery,” adds Falcon.

How can you tell if a decision is driven by logic rather than emotion? According to Carson McLean, CFP^®, founder and financial advisor at Altruist Wealth Management, “If a move wasn’t part of your plan six months ago, there’s a good chance it’s an emotional reaction.” In other words, strategic portfolio adjustments, such as routine rebalancing, should align with your long-term plan, rather than being reactive attempts to chase short-term gains or avoid temporary losses.

2. Keep a Long-Term Mindset

Market volatility, while unsettling, isn’t typically a reason to stray from your long-term investment strategy. Rather than react based on emotion, it’s important to consider your time horizon (or how long until you reach your goal).

For example, if you’re planning for retirement and have several years or decades to go, riding out the market dip is often the best course of action to allow for recovery. “The S&P 500 declines 5% or more several times a year, 10% corrections can happen about one to every two years and bear markets occur roughly every six years – but the market has always recovered over time,” says Ben Loughery, CFP^®, CRPC^™, founder of Lock Wealth Management. While downturns are inevitable, so are rebounds over time.

However, if you’re approaching retirement, market downturns can feel more concerning. Ideally, you’ll have prepared for this by shifting your investment strategy to include fixed-income securities and additional cash reserves to mitigate risk for a shorter time horizon. Even in this stage, it’s crucial to stay calm. If you’re uncertain about the best course of action, consulting a financial advisor can help ensure your portfolio aligns with your evolving needs.

The primary message here is that, while market volatility can be a concern, it’s wisest to have a plan and, in most cases, stick to it. Making short-term decisions, whether it’s to cut losses or see quick returns, can result in long-term consequences. By keeping your future in mind, it’ll be easier to ride out the difficult conditions and remain on track.

3. Focus on Diversification and Rebalance If Necessary

Diversification is an effective and common strategy to manage your portfolio’s risk, especially during market uncertainty. By spreading your investments across various asset classes, such as stocks, bonds, alternatives, and cash, you ensure your entire portfolio doesn’t feel the impact on one particular asset class. A well-diversified portfolio is typically more resilient, balancing potential losses in some assets with gains or stability in others, helping investors stay on track through market fluctuations.

While no investment is immune to poor market conditions, some assets are more resistant and help mitigate volatility. Specifically, short- and intermediate-term assets, such as fixed-income securities and cash, tend to be less prone to the same level of market swings as equities. Some examples include:

• Individual bonds
• Bond funds
• Treasury Inflation-Protected Securities (TIPS)
• Money market funds
• Certificates of deposit (CDs)
• Cash

“To manage risk in an unpredictable market, I recommend diversifying investments across different asset classes and styles. Additionally, maintaining a portion of the portfolio in cash or short-term bonds can provide liquidity and reduce overall risk,” says Falcon.

It can be tempting to sell assets in a panic during market downturns; however, a disciplined approach to portfolio rebalancing is essential. As McLean explains, “Stocks fall, and the natural instinct is to sell. A disciplined rebalancing strategy forces investors to do the opposite—sell what’s up, buy what’s down.”

4. Accept Market Volatility

Each year, U.S. and foreign markets will ebb and flow according to global events, interest rates, and the overall state of the economy. The key, however, is to understand that this volatility is a normal part of investing. By adopting this mindset, you’ll be less susceptible to panic and hasty decision-making when your investments dip in value.

Market volatility can be an opportune time to buy quality assets at a lower price than they typically carry. Stocks, bonds, and mutual funds, for instance, all feel the effects of a slumping economy. If you’re sticking to your long-term strategy, you may be in a position to take advantage of these lowered prices. However, it’s important to use caution and consult your financial advisor before making any changes to your portfolio.

Marcus Sturdivant, Sr., a financial advisor based in North Carolina, echoes that accepting volatility is key, reminding investors that “this, too, shall pass.” He advises clients to focus on their plan rather than reacting emotionally, emphasizing that “the market goes up and down, but overall, it goes up and to the right.” To highlight this, Sturdivant notes a historical perspective, referencing a 1932 memo from Dean Witter that reassured investors during the Great Depression that markets would readjust.

5. Seek Professional Guidance

During periods of market uncertainty, you might feel confused, anxious, or fearful about the future. Turning to a financial advisor can help you gain clarity about your plan and feel more confident about reaching your long-term goals. A professional’s knowledge of investment strategies and risk management can help you avoid emotional decision-making and stay on track during challenging times.

Beyond assisting you with your investments, financial advisors can also provide emotional support and behavioral guidance. If the markets fall, a professional can sit down with you and help explain why it’s happening and what it might mean for your financial plan. This can help you make objective decisions that keep your future in focus.

When searching for a financial advisor, it’s important to prioritize fiduciaries—professionals who are legally obligated to act in your best interest at all times. Titles like Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), and Certified Investment Management Analyst (CIMA) indicate a high level of expertise and adherence to ethical standards.

If you’re unsure where to start, consider using this free matching tool. It connects you with vetted fiduciaries based on your unique goals and financial situation, helping you find a trusted advisor who aligns with your needs.

Words of Advice from Financial Advisors

To help investors navigate market uncertainty, we asked financial advisors to share their best pieces of advice. Here’s what they had to say:

Jake Falcon, CRPC^™: “One piece of advice I give to anxious investors is to focus on what they can control, such as their investment strategy and cash flow, rather than trying to predict market movements. Staying informed and working with a trusted wealth advisor can also help alleviate anxiety.”

Ben Loughery, CFP^®, CRPC^™: “A piece of advice for investors, who feel anxious about market fluctuations, I would tell them is that uncertainty is the price of admission for long-term growth. Instead of fearing volatility, let’s focus on how markets have always recovered – and use these downturns to buy great assets at lower prices. I also check in with my clients whether nervous or not, and I feel like it can help when we review their financial plan to show that they have a strategy in place which removes a lot of stress.”

Carson McLean, CFP^®: “If you can’t sleep at night, it’s not just the market, it’s your portfolio telling you that your risk tolerance may have been overconfident in the good times. Market corrections aren’t fun, but they shouldn’t cause crippling anxiety. If they do, it’s a sign your allocation needs adjusting. Not in the middle of the storm, but before the next one.”

Marcus Sturdivant Sr.: “Stick to the script that [you and your advisor] worked out. The plan [you] have in place has protections for market downturns and corrections. Keep emotions and politics out of this crucial money decision and use the data.”