Stick to Your Plan When Markets Get Noisy

What if the real danger to your portfolio isn’t the next headline—but your reaction to it?

We live in a world where market-moving headlines arrive faster than you can refresh the website page or social media feed you are viewing. Whether it’s a new round of tariffs, a shift in trade policy, or an unexpected political development, volatility has become the norm. For high-net-worth individuals, business professionals, and entrepreneurs in Canada, that volatility often prompts one of two reactions: panic or paralysis.

But seasoned financial advisors and their clients know something different. They know that in the face of uncertainty, timeless principles matter more than timely news. Let’s explore how a disciplined value investing strategy provides clarity amid chaos and how it might be the most powerful way to navigate today’s turbulent markets. 

Reality versus Perception

Misinformation, disinformation, and propaganda are buzzwords not only in the political arena, but they have also come home to roost in our everyday lives. Do you know the most common myths in the stock market today?

Here are some of the financial myths that may not be all they seem:

• Wait it out: Many people feel that when volatility arrives, it's better to pull their investments and wait out the storm in safety. However, for investors with longer horizons, it may be better to leave their money invested: “Since 1974, the S&P 500 returns over 24% on average following a correction.”
• Timing the Market: If you feel the right choice is to sell off when there is volatility and that you will be able to ‘time the market’ on the way back up, the reality may shock you. There is an overwhelming body of evidence and empirical data that proves otherwise. According to Morningstar’s “Mind the Gap” study in 2021, investors over the long term realized 1.7% lower returns when they tried to time the market.
• Expect 10% Returns Every Year: Of course, over the very long term, the annualized average return on the stock market has been 10%. YET, why is it that the S&P 500 has only hit this average 8 times since 1926? The answer is that there is no such thing as a ‘typical’ year that matches this long-term average. The only way to get there is by staying invested over a long time period.
  

A Climate of Uncertainty

The Trump presidency has ushered in a new era of economic nationalism in the US. The US-China trade war, broad tariffs threatened on Canada, and even reciprocal tariffs on every country in the world from the US have led to wide-reaching consequences for global supply chains and investor sentiment. These were not just geopolitical moves, they were market-shaping events.

The fallout from this has been whipsawing stock prices, as a rise in protectionist rhetoric and policies globally add a persistent cloud of uncertainty over global markets. The temptation for investors to react emotionally has never been greater. However, if you have read my previous missives, you would know that while headlines may move markets in the short term, fundamentals drive long-term value.

Why Fundamentals Matter More Than Headlines

At the core of value investing is a simple but powerful idea: buy businesses for less than they are worth and hold them long enough for that value to be realized. Here are some of those principles:

1.   Intrinsic Value vs. Market Price – since the market is a popularity contest in the short-term, it is also true that it is a weights scale in the long-term. What a company is trading for today is not necessarily what it’s worth. Value investing is about identifying that disconnect.
2. Margin of Safety – for clients that have been investing over the long term and staying invested, your margin of safety provides a defense against market volatility. Buying undervalued stocks provides a buffer against downturns.
3. Mr. Market Analogy – refers to how the market is an emotional business partner trying avidly to buy or sell shares at wildly different prices every day. By staying invested, you cut out this noise and just worry about the end horizon.
4. Fundamentals Over Speculation – timing the market, day trading, and a host of other short-term activities are often seen as speculative guesswork. Whereas fundamental analysis is equated to long-term due diligence. It's imperative in this market to do a deep dive into fundamentals, especially as the world markets go through upheaval.

Don’t Stay on the Sidelines

You have stayed invested, but are concerned about putting more money into the volatility of the market? Apply value investing principles to take action and find value in today’s market, by:

• Finding Intrinsic Value in a Shaky Market – companies that have become undervalued because they are out of favour provide opportunities.
•  Use the Margin of Safety – as mentioned above, build in an extra buffer when searching for new opportunities. This extra discount allows room for error and usually better long-term outcomes.
• Avoid the Trap – again, do not worry about timing the market; it’s a gamble. Stick to your principles and look for opportunities that will translate into a sound purchase over the long-term.
• Patience as Discipline – for investing, patience is a virtue and a skill. Disciplined investors bide their time to avoid trends that may go out of favour quickly in a volatile market, to search for value.

Defensive vs. Enterprising Investor Strategies

Your investing temperament and time commitment should guide your approach, considering that value investing allows for both types of investors. Here is how each type of investor would apply value investing in their strategies:

A Defensive Value Investor:

• Diversifies across low-cost, value-driven ETFs
• Focuses on dividend-paying stocks and blue-chip names with strong financials
• Sticks to broad fundamentals and avoids chasing headlines or trends.

An Enterprising Value Investor:

·      Explores underappreciated sectors affected by trade tensions such as manufacturing or technology with overseas exposure

• ·      Researches businesses temporarily hit by policy shifts but with resilient models and strong fundamentals
• ·      Is prepared to hold through volatility to realize value.

Ask your advisor to help you understand which type of investor you are and how to approach these difficult times before considering a full pullout.

There is Always Risk

No strategy or investment philosophy is immune to risk, including value investing. Here are some common risks to watch out for in value investing:

1.  Value Traps – sometimes it's on sale for a good reason. This is why researching fundamentals is important to determine if they support a recovery and not a continued decline.
2. Policy Persistence – are the geopolitical changes and policies of this administration going to outlive your investment time horizon? You may still need to adjust and having a financial advisor can help you make the right choice for your situation.
3. Backward-Looking Data – just looking at last year’s earnings may not be enough to assess a company’s value. Evaluating a company’s management adaptability and its business model resilience especially during volatility is important to see into a blind spot.

Finally, Volatility Isn’t the Enemy, Emotion Is

I firmly believe enduring investment success doesn’t come from reacting to the news cycle. It comes from trusting a proven process that is grounded in investment fundamentals. Value investing is about providing results for those with the discipline to stay the course.

Lastly, as markets will continue to remain noisy and our narratives shift, remember that volatility is not something to fear, but for the patient and disciplined investor, it’s something to use.

Looking to make a change, want a second opinion, or looking for additional advice? Feel free to reach out to me any time by phone or email.

Steve McBride, Investment Advisor, Ventum Financial, looks forward to connecting with you about your future wealth management needs.

Sources:

1. A History Lesson on Market Corrections
2. The Case Against Market Timing
3. What is the Average Stock Market Return
4. The Value Investing Strategy

Participants of all Canadian Marketplaces. Members: Canadian Investment Regulatory Organization, Canadian Investor Protection Fund and AdvantageBC International Business Centre - Vancouver. Estimates and projections contained herein are our own and are based on assumptions which. we believe to be reasonable. Information presented herein, while obtained from sources we believe to be reliable, is not guaranteed either as to accuracy or completeness, nor in providing it does Ventum Financial Corp. assume any responsibility or liability. This information is given as of the date appearing on this report, and Ventum Financial Corp. assumes no obligation to update the information or advise on further developments relating to securities. Ventum Financial Corp. and its affiliates, as well as their respective partners, directors, shareholders, and employees may have a position in the securities mentioned herein and may make purchases and/or sales from time to time. Ventum Financial Corp. may act, or may have acted in the past, as a financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein and may receive, or may have received, a remuneration for their services from those companies. This report is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities and is intended for distribution only in those jurisdictions where Ventum Financial Corp. is registered as an advisor or a dealer in securities. Any distribution or dissemination of this report in any other jurisdiction is strictly prohibited.