Given the events unfolding in the Middle East over recent days, we wanted to reach out as we know that headlines like these can feel unsettling – not just because of what they might mean for your investments, but on a human level too.
What has happened?
Tensions in the Middle East escalated significantly following coordinated U.S. and Israeli strikes on Iranian targets, which resulted in the death of Iran’s Supreme Leader. In response, Iran has launched retaliatory strikes across parts of the region, including Israel and several Gulf states. This is the most significant escalation the region has seen in recent years and has understandably introduced fresh uncertainty into global markets.
In the immediate aftermath, we have seen what you would typically expect in moments like these: investors have moved towards traditional safe havens such as gold and the U.S. dollar, while global stock markets opened slightly lower. Oil prices have risen sharply, in part due to the closure of the Strait of Hormuz – a key shipping route that handles around a fifth of the world’s oil transportation. There is some concern this could feed into higher inflation, though it is still very early days and markets are continuing to absorb the news.
What does this mean for your money?
Importantly, history tells us that geopolitical shocks like these tend to cause short-term market turbulence driven largely by sentiment, rather than lasting shifts in economic fundamentals.
We completely understand if you feel uneasy right now – that is a perfectly natural response. But experience has shown time and again that reacting emotionally to short-term market movements is one of the biggest risks to achieving your long-term goals. The urge to “do something” is strong in moments like these, but more often than not, staying patient is the most powerful thing you can do.
Five things worth thinking about at times like this
When the world feels uncertain, it is tempting to want to take control by making changes to your investments. Before doing so, we would encourage you to sit with these five thoughts:
1. Does anyone truly know how this will play out?
Geopolitical events are enormously complex, and even the most seasoned experts struggle to predict what will happen next. The good news is that you do not need to be able to forecast world events to achieve strong long-term returns. Your plan was built with uncertainty in mind – it does not rely on getting predictions right.
2. Even if we could predict events, can we predict how markets will respond?
Markets reflect the decisions of millions of investors around the world, and much of what we read in the news is already factored into prices by the time we see it. Trying to time your investments around headline events is a bit like trying to steer a boat by looking at yesterday’s weather – the conditions have usually already shifted.
3. How much will this really matter over the term of your investment?
Many events that feel seismic in the moment turn out to have a surprisingly modest impact on long-term investment returns. Stock markets have weathered world wars, financial crises, pandemics, and countless geopolitical flashpoints – and have consistently recovered and grown over time. Your investment horizon is your greatest asset during moments like these.
4. Is your portfolio already built to handle this kind of uncertainty?
The answer, in all likelihood, is yes. Diversification is at the heart of the portfolio we have built together. It is specifically designed so that you are not dependent on any single event, market, or outcome going in your favour. Think of it as having multiple safety nets rather than just one.
5. Has what you actually want from your money changed?
This is perhaps the most important question of all. When markets wobble, it is natural to feel the pull to change course. But take a moment to ask yourself: have your financial goals – your retirement plans, your family’s future, the life you are working towards – actually changed because of what is in the news this week? If the answer is no, then any urge to act is likely being driven by the moment rather than by what truly matters to you.
We are here for you
Your financial plan was built around your goals, your circumstances, and your timeline. It was designed to withstand exactly these kinds of periods, and we remain fully confident in the long-term strategy we have put in place together.
In short: we do not believe this warrants any changes to your long-term plan. Our investment team is actively monitoring the situation and working closely with fund managers to identify and assess any specific risks within your portfolio.
This communication is for information purposes only and does not constitute financial advice. The value of investments and the income from them can go down as well as up, and you may get back less than you invested. Past performance is not a reliable indicator of future results. Lathe & Co is authorised and regulated by the Financial Conduct Authority.
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