Market seems to be in a free fall, and it is tempting to react to the noise. It is at times like this we have to be more disciplined and remain calm.
The fallout from President Trump’s “Liberation Day.” His tariff policy announcement was even more severe than expected, triggering a market sell-off not seen since the height of the pandemic in March 2020. (Please refer to the attached document for further details on each market). Click on this to see a chart that displays the S&P500's performance for each calendar year since 1979. The chart shows the total annual return alongside the largest intra-year rise and the deepest decline. This visual emphasises that, even if the market experiences a significant dip during the year, the overall return can still finish in positive territory. Beyond illustrating these fluctuations, the chart serves as a reminder of the market's resilience—short-term volatility does not necessarily prevent longer-term gains.
While this sell-off has happened quickly—though not as significant overall as in 2022—there are key differences in how portfolios have reacted. Back then, inflation ran out of control, driving interest rates from near 0% to over 5% globally, and fixed-income investments suffered nearly as much as shares.
This time, concerns around a global slowdown or potential recession have led to a flight to safety, with interest rates falling across the board. As a result, fixed-income assets have risen in value, offering a buffer against market volatility.
At Optima Wealth, our approach over the coming weeks and months will be tailored to individual circumstances, but here’s how we are managing portfolios to preserve and grow wealth:
- For those drawing income or needing short-term capital – We will focus on selling conservative assets, which have gained value, while leaving growth assets to recover over time.
- For long-term investors focused on growth – We will rebalance portfolios to target allocations, selling profits from fixed-income investments and purchasing discounted growth assets—boosting long-term returns. Our 2020 rebalancing approach increased returns by around 0.25% that year—not huge, but every little bit helps.
- For those adding to their portfolios (including KiwiSaver) – Market downturns can be an opportunity. Lower prices mean each dollar invested buys more, setting the foundation for future strong returns. Historically, funds invested during market downturns deliver some of the highest returns over time.
- For recent new investors – Market declines are unsettling, but they happen because uncertainty is at its peak. Over the medium to long term, what causes these selloffs fades into history, and disciplined investors are rewarded as markets reach new highs.
- For new investors about to invest – Happy days, you are buying assets at a discount. Do not get distracted by the noise, this is an opportunity, and you got lucky with the timing.
In short, we are not selling long-term investments due to this volatility. Instead, we remain disciplined buyers—through rebalancing, ongoing savings, and new investments.
If you’re wondering what I’m personally doing: I’ve sold some of my fixed-income investments and am preparing to buy more growth assets. Yes, markets may fall further—but that only strengthens our conviction to stay patient and focused on the long term.
Over the coming days, investors will be watching for signs of further tariff retaliation (or negotiation), as well as key U.S. inflation data. Here in New Zealand, the Reserve Bank of New Zealand will take centre stage, with a 0.25% cut to the OCR widely expected.
If you have any concerns, please don’t hesitate to reach out. Otherwise, stay focused on the bigger picture—headlines can be distracting, but short-term movements don’t affect our long-term strategy.
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