The original version of this article first appeared in The Business Times. 

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The market is on a tear. The S&P 500 is up for nine consecutive days, rebounding 14% from the recent low. This is the first time that the S&P 500 has risen for nine trading days in a row in 21 years. It is also the best nine-day winning streak in percentage gains in history. This is not what was supposed to happen. 

When the US dropped a bombshell announcing new punitive tariffs on 2 April, markets plunged further, already off their highs. The subsequent shock and escalation of tariffs, especially between the US and China, led to sharp falls. People were panic-selling, questioning whether this was the beginning of the end. Concerns about a recession, a bear market, or worse, arose. The term “stagflation” reappeared in media and social posts. More than US$9 trillion of wealth was wiped out. But then, almost overnight, things reversed.

On 9 April, President Trump declared on social media, “This is a great time to buy.” That marked the bottom, and we have not looked back since. He also announced a pause on some tariffs and signalled a willingness to negotiate trade deals. This week, China quietly exempted about a quarter of US imports from tariffs, following a similar move from the US earlier. Now, there's even talk of negotiations. How quickly situations can change.

And so, just weeks after intense volatility, the global market has essentially returned to where it started. The global stock market is now flat for the year. While Europe and China have performed better, the US and tech sectors have lagged. In hindsight, it was “much ado about nothing.”

Why the best investors look further

In thirty years of investing, I have found that the best investors—those who navigate volatility with grace—are not just skilled with numbers. They are historians and philosophers. They dig beneath the surface, looking beyond headlines and short-term market moves to discern the deeper forces at work.

Even greats like Warren Buffett, Howard Marks, or George Soros do not attempt to time the market. What sets them apart is a strong investment philosophy and a grounded perspective. These traits allow them to stay patient, even when sentiment is at extremes.

Now is a good time to revisit one of those grounding perspectives: the idea that growth, in markets and life, is embedded in the laws of nature. Investors often forget or overlook the inherent strength and power of markets, especially during periods of high volatility and uncertainty.

The universe expands—and so do markets

Since the beginning of time, the universe has never stopped expanding, with scientists saying that the universe is continuing to expand at an accelerating pace. The initial rapid surge in early expansion from the point of creation, or the “Big Bang”, is referred to by scientists as “inflation”. It's no coincidence that this same concept underpins our economic systems.

Humanity, likewise, has never stopped growing. Since the 1900s, the global population has ballooned, now crossing 8 billion. Similarly, global GDP and the quantum of monetary or system liquidity have also continued to expand over time. Since the 1980s, global liquidity has entered an exponential phase of expansion.

In other words, it is inherent in our design and structure that there is an expansive, even inflationary, aspect to our growth. Human beings are meant to grow and multiply. Markets reflect this innate design. 

When sentiment swings from fear to optimism in a matter of days, it is tempting to react. But reacting is often the enemy of returns. The sharp rebounds we’ve seen, just like the drawdowns before them, underscore how difficult it is to time markets consistently. This is why staying invested is so important. We are investing in an inherently expansive system, despite the bumps along the way.

Long-term S&P 500 index chart since its 1927 inception

The case for staying invested

Yes, earnings downgrades may come through. Analysts can project slower growth due to lower trade and reduced industrial activity. But analysts often overreact, boosting earnings too much in good times and slashing them too deeply in tough times. Earnings are a lagging indicator, not a leading indicator.

The effects of shocks take time to play out. COVID-19 took two years to impact supply chains fully. Inflation, which surged in 2022, came well after the initial pandemic shock, and the policy response followed with aggressive rate hikes. In 2022, the S&P 500 fell by 25.4% from peak to trough, while NASDAQ fell by 36.4% between the end of 2021 and the end of 2022 as an economic cycle played out.  We can argue that the external shock was a major factor in causing the subsequent playing out of the economic reality. 

What we have seen is clearly an external shock, and the market reacted quickly and recovered quickly in a similar vein to 2020 during COVID. Markets are efficient at pricing in bad news quickly. Recovery often starts well before the headlines improve. However, the longer-term consequences of these actions have yet to play out and just as it did in 2022, it may take two years for the full extent of the consequences to play out. 

Diversification is a time-tested way to reduce risk and smooth out returns. It means gaining exposure to a range of sectors, regions, and asset classes—not chasing performance in a single asset or trend. The balanced portfolio of 60% equity and 40% bonds has been working well this year in lowering volatility. Gold is another case in point. 

However, one must be aware as a Singapore investor that while gold has performed well when adjusted into Singapore dollars, returns are slightly less. While in the short term, gold can be a good hedge against volatility, over the long term, it also gives you exposure to a US dollar-priced commodity. With Singapore’s prudent fiscal management, the Singapore dollar is already seen as a relatively safe haven currency and may continue to appreciate against the US dollar over the long term. Thus, investors should think in home currency terms—not just what’s flashy in global headlines – because our future liabilities are in Singaporean dollars, and there is no need to take unnecessary currency risk.

Uncertainty is the only constant

Policy uncertainty remains high, and so too does market volatility. Measures such as the CBOE Volatility Index and other financial stress indicators remain elevated, but we have already seen how markets rapidly price in negative news and sometimes reverse course before we can react.

What if Trump changes his tune again, perhaps ahead of next year’s midterms? What if growth slows, employment weakens, and the Fed begins cutting rates? We cannot predict these shifts, control the markets, or what Trump does next, or even where tariffs are headed. However, you can control your behaviour, your discipline and your investment process. 

Emotions—especially fear and greed—are powerful. They can lead investors to chase returns, abandon plans, or take on unintended risks. Investing is less about predicting the next move and more about positioning yourself to benefit from the long-term, expansive nature of markets by staying focused on your goals and disciplined in your process. It is this faith in the power of markets that has driven the greatest success for investors over the long term.