Blog excerpt:

The Big Picture

Markets can rise or fall sharply as investors digest inflation figures, interest-rate expectations, wars, elections and company news. Trying to predict every daily move is almost impossible, but the good news is you do not need to do it to be a successful investor.

The real danger is rarely volatility itself. It is being forced or frightened into selling at precisely the wrong time.

The Need-to-Knows

• Expect a market fall every year. An intra-year decline does not automatically mean the year will end with a loss.
• 2026 has been choppy, not exceptional. There have been fewer extreme daily moves than during the same period in 2025.
• Selling creates a second difficult decision. You must decide not only when to leave, but when to reinvest.
• Understand what is causing the fall. Bonds may protect against a recession shock but offer less protection during an inflation shock.
• Match your investments to your spending date. Money you may need soon should not depend on the stock market being kind.

The Deep Dive

1. The market is reacting to news, not giving you instructions

Markets are constantly adjusting prices as new information arrives.

An inflation figure comes in higher than expected. Bond yields rise. Shares fall.

A few days later, economic growth weakens. Investors expect interest-rate cuts. Bonds and shares recover.

Then an unexpected political announcement changes the picture again.

This does not necessarily mean investors are behaving irrationally. It means prices are adjusting to new information.

The problem is that you usually receive the news at the same time as millions of other investors. By the time you have read the headline, the market has normally reacted.

You would need to answer two questions correctly:

1. Is the news better or worse than the market expected?
2. How will other investors react to it?

That is very different from simply predicting whether the news itself will be good or bad.

Your investment plan should not rely on consistently being faster or cleverer than the market.

2. Expect an intra-year fall, because it happens regularly

One of the most useful charts for nervous investors compares:

• the market’s largest fall during each year, and
• the market’s eventual return for the full year.

These are two very different numbers.

A market might fall by 12% between February and April, recover during the summer and still finish the year 8% higher.

J.P. Morgan’s data for the MSCI World Index show that between 1986 and 2025:

• the average intra-year fall was 14.6%;
• the median fall was 10.5%; and
• the market still produced a positive calendar-year return in 29 of the 40 years.

In 2026, global shares had already suffered an intra-year decline of approximately 8%, yet were around 10% higher for the year by 30 June.

The key lesson: a 10% fall during the year is not unusual. It is the price investors regularly pay for access to the stock market’s long-term growth.

3. Is 2026 really more volatile than normal?

Headlines can make every period feel unprecedented. The numbers give a calmer picture.

Based on calculations from daily S&P 500 closing prices, this is how the period to around 21 July compares:

Calculations use S&P 500 daily closing prices.

The number of rising and falling days is remarkably ordinary. And while 2026 has experienced more large moves than the unusually calm first part of 2024, it has had far fewer 2% moves than 2025.

So the sensible conclusion is not that 2026 has been completely calm.

It is this:

Volatility has been noticeable, but it has not been historically exceptional.

4. Why selling during a fall can be so expensive

Selling may provide immediate emotional relief. Your portfolio stops falling because it is no longer invested.

But you have not solved the problem. You have created a new one.

When will you reinvest?

Most investors tell themselves they will return when:

• inflation is under control;
• the war has ended;
• interest rates have fallen;
• the economy looks stronger; or
• markets have become calmer.

Unfortunately, markets normally start recovering before the news feels comfortable.

The strongest and weakest trading days also tend to occur close together. Vanguard found that between 1980 and 2025, 12 of the 20 best global-market days occurred during negative calendar years, while nine of the 20 worst days occurred during otherwise positive years.

You cannot reliably avoid the bad days without risking missing the rebound.

Vanguard also examined investors who moved from a globally diversified 60% shares and 40% bonds portfolio into cash after a market fall:

• after three months, the cash investor underperformed in 63% of cases;
• after six months, the figure rose to 74%; and
• after 12 months, the cash investor underperformed in 80% of cases, with an average shortfall of 10.8%.

The study used sterling returns between January 1990 and December 2025.

Selling does not always lead to a loss. But it can turn a temporary market fall into a permanent loss—and leave you buying back after prices have already recovered.

5. Time in the market changes the odds

Shares are unpredictable over short periods. That is why money needed soon should not normally be wholly invested in them.

Historical S&P 500 results illustrate how the odds have improved as the holding period increased:

These figures cover periods ending on 31 December 2025. They relate to the US market, before personal taxes, platform fees and fund charges, and are not forecasts. A UK investor’s sterling return can also be affected by currency movements. citeturn127536view0

J.P. Morgan’s rolling-return data provide another way of viewing the risk. Since 1950, the worst annualised US equity result was:

• -43% over one year;
• -7% a year over five years;
• -3% a year over ten years; and
• +4% a year over twenty years.

There were no negative 20-year periods in that particular historical dataset. That does not guarantee the future, but it demonstrates why investment time horizon matters.

For most investors, the practical rule is simple:

Do not put money into shares when you know you are likely to need it within the next few years.

6. Understand what is causing the volatility

Diversification does not mean every asset will rise whenever shares fall.

The reason for the market decline matters.

A growth or recession shock

Investors may expect inflation and interest rates to fall. High-quality government bond prices can rise, helping offset equity losses.

An inflation or supply shock

An oil-price surge, supply-chain disruption or unexpectedly high inflation figure can push interest-rate expectations and bond yields higher.

When yields rise:

• longer-dated bond prices can fall;
• equity valuations can also fall; and
• shares and bonds may decline together.

The IMF has warned that more frequent supply shocks have weakened the traditional equity-bond hedging relationship.

That does not mean bonds are useless. It means not all bonds protect against every risk.

Short-dated gilts, conventional long-dated gilts, index-linked gilts and corporate bonds can behave very differently. Your bond allocation should have a clear purpose rather than simply being labelled “the safe part”.

7. “Don’t just do something, stand there!”

John Bogle, the founder of Vanguard, was famous for applying this phrase to investing:

“Don’t just do something, stand there!”

His message was not that investors should ignore genuine problems. It was that constant activity is not the same as intelligent decision-making.

Doing nothing can be the correct decision when:

• your goals have not changed;
• your investment time horizon remains long;
• your portfolio is properly diversified;
• you have enough accessible cash;
• your risk level remains suitable; and
• your investments are behaving broadly as expected.

But you must stand in the right place.

Doing nothing will not rescue an unsuitable portfolio containing excessive borrowing, a handful of speculative shares or money needed for next year’s house deposit.

Do This Now: Your Volatility Action Plan

1. Divide your money by when it will be needed

Create three separate pots:

• Emergency and immediate spending: easy-access cash.
• Money required over the next few years: cash, savings products or an appropriately cautious portfolio.
• Long-term money: a diversified investment portfolio.

2. Decide your rules before markets fall

Write down:

• your target asset allocation;
• the level of risk you expect;
• when you will rebalance;
• how frequently you will review the portfolio; and
• what would represent a genuine reason to change course.

Make these decisions while you are calm—not after a frightening headline.

3. Rebalance rather than predict

When shares fall, your equity weighting may drop below its target.

Rebalancing involves topping it back up using new contributions, cash or gains from assets that have held up better.

This is a disciplined way to buy at lower prices without pretending you know where the market bottom will be.

4. Check the cause of the shock

Ask:

• Is this an inflation shock?
• Is economic growth weakening?
• Are interest-rate expectations changing?
• Is the problem concentrated in one country or sector?
• Is this changing long-term company profits—or simply short-term sentiment?

Understanding the cause helps you check whether the portfolio is doing its job.

It does not mean rebuilding the portfolio after every new economic release.

5. Reduce the noise

Consider checking a long-term portfolio monthly or quarterly rather than several times each day.

Turn off unnecessary market alerts. Avoid treating every market commentator, social-media post or television interview as an instruction to trade.

The more frequently you look, the more opportunities you create to make an emotional decision.

The Bottom Line

Stock market volatility is not an unexpected fault in the market. It is part of the market.

You cannot control the next inflation figure, political announcement or market fall. But you can control:

• how much cash you keep;
• when your money will be needed;
• how widely you diversify;
• how often you check your portfolio; and
• whether you follow a plan or follow the headlines.

Prepare before markets fall. Then, when volatility arrives, you may be able to follow Bogle’s advice:

Don’t just do something. Stand there.

This article provides general financial guidance and education, not personal financial advice. Investments can fall as well as rise, and you may get back less than you invest. Tax rules depend on individual circumstances and can change. Consider regulated financial advice when you are unsure whether an investment or withdrawal strategy is suitable for you.