This article was first published in April 2019 and updated to reflect recent events.
No one could have precisely predicted the market’s dynamic journey this year. After a strong end to 2024, when we saw market corrections, the start of 2025 brought a dramatic shift.
We witnessed a strong start to the year, only for the global markets to experience considerable fluctuations, due in part to the tech crash in January, and a sharp downturn in early April when US President Donald Trump announced new tariff policies. The S&P 500 Index, for instance, tumbled significantly before partially recovering later in May after some tariff pauses.
These market movements, whether sharp rallies or sudden dips, naturally stir emotions of panic, fear and anxiety. During such times, investors tend to look to others to determine their next steps.
In this article, we unpack what market rallies mean for you and, importantly, highlight why a disciplined, long-term approach consistently proves to be the most rewarding strategy.
1. "How long can this last? When will it end?"
These questions, at their heart, are about attempting to time the market – a pursuit that history has repeatedly shown to be incredibly challenging, if not futile.
The first often comes from those uninvested on the sidelines, observing the market’s peak with frustration and regret. The second might stem from a natural contrarian streak, or perhaps a cautious temperament, focused on potential downsides even when things are going well.
We all harbour that inner “hero” who dreams of selling at the peak and buying at the bottom. But the reality is far less glamorous. Recall those who, driven by euphoria, chased the market into its pre-tariff highs in early 2025, only to see a sharp reversal in April. Or consider those who, gripped by fear, sold at the bottom in April and missed the subsequent recovery in May.
What can you do? Don’t get fixated on where markets might go next – trying to time the market is an impossible game. Instead, redirect that energy to a personalised, long-term investment plan that you can stick with, regardless of whether the markets are going up or down.
2. "Why is this going up (or down)? Who's driving this?"
It's entirely natural to seek explanations for market behaviour. Our brains are wired to find patterns and reasons for events, especially in retrospect. We often retrofit (also often called backtesting) a framework in which we try to reason about market movements.
In January this year, the US tech market crashed despite being one of the better-performing sectors in December 2024. The subsequent April downturn was linked to the tariff announcements.
Trying to understand the cause of financial market movements is an admirable effort, but we should be mindful not to let knowledge turn into overconfidence in our ability to predict the future of the market.
History may rhyme, but it never repeats itself in the same manner, especially when it comes to financial markets. The market is a collective decision-making process resulting in constant price discovery, with all known public information being priced into the market at any given point in time. It is a voting machine in the short term and a weighing machine in the long term. No one can consistently expect to have a better understanding or an information advantage that will sustain an investment advantage. That is why investing broadly and consistently in markets is the right way to go in the long run.
What can you do? It is a natural human tendency to seek explanations for market movements, but understanding past events should not be mistaken for the ability to predict future outcomes. Therefore, the most effective evidence-based strategy is to accept this unpredictability and focus on what you can control: investing broadly and consistently over the long term through a diversified portfolio.
3. "Should we chase or buy more? Should we sell for profit?"
These questions reveal the two primal human biases that often derail sound investing: greed and fear. The former manifests in the urge to "chase", suggesting a momentum-driven mindset, prone to buying into euphoria. The latter shows up in the form of an impulse to "sell and take profit", which often indicates scepticism or a fear of losing gains, pushing towards premature exits. Especially when markets rally, the crowd divides into these two main camps. Those driven by greed and fear – primitive and natural desires that drive the impulse to time the markets by chasing market rallies or to lock in the profits and flee.
However, a robust, evidence-based investment strategy isn't built on price movements or fleeting emotions. It is grounded in principles proven over decades. While short-term luck might sometimes reward emotional decisions, sustainable wealth creation comes from discipline and adherence to a well-thought-out plan.
What can you do? Instead of waiting for an unpredictable dip, embrace dollar-cost averaging (DCA). By regularly investing a fixed amount, you systematically put in investments regardless of price. This disciplined approach eliminates the need to time the market, reduces emotional stress, and ensures you're always participating. It's a pragmatic and proven method for long-term wealth accumulation.
4. "Why didn't I invest more?"
Hindsight investing is a classic trap in the investing world. Investors who ask this rhetorical question were too risk-averse to put their cash to work in the markets and look back with regret that they should have bought or invested more.
But consider the flip side: when markets are falling, the same person might be the first to regret investing at all. This highlights the critical importance of defining your personal risk appetite upfront.
What can you do? Gauge the level of risk that genuinely feels appropriate for you, and commit to it. This foundational step in financial planning allows you to invest systematically and confidently regardless of market volatility.
5. "Should we wait for a correction to add to the position?"
This question, while more pragmatic, reveals susceptibility to falling into the temptation of market timing. It's the "passive-aggressive" form of regret – wanting to invest more, but hoping for a discounted entry.
The truth is, we simply don't know if the market will continue its rally or experience a meaningful correction from here. Both outcomes are always possible. What we do know is that the market has trended upwards over its 100-year history.
What can you do? Avoid the emotional whipsaw. Your investment strategy should be based on your long-term financial goals and risk tolerance, not on the market's latest daily performance. Try to revisit your asset allocation regularly, but for rebalancing purposes, not for impulsive reactions.
The Endowus philosophy: Time in the market, not timing the market
Studying the past is how we learned many of the truths of financial markets that are embedded in our Endowus investment philosophy. These truths have been proven across markets and through cycles, such as the benefits of asset allocation and diversification, the significant negative impact of high costs to returns, and the enduring power of markets to reward the long-term investor.
The behavioural aspect of managing money is an important part of what Endowus wants to improve in our experience of investing. What we should control is not the timing of our investments but our own emotions, and the behavioural mistakes we are prone to make, driven by these emotions. Here’s a broad summary of what you can do as an investor to improve your odds of success:
- Broad diversification: Spread your investments across various asset classes, sectors, and geographies to mitigate risk. Diversification offers more protection for your portfolio from drastic asset class-, sector- or geography-specific plunges..
- Systematic investing: Automate your investments to take emotion out of your investing decisions, maintaining focus and discipline for long-term success.
- Long-term perspective: Understand that volatility is simply a feature of the markets and focus on your long-term financial goals. Trust in the expansionary nature of the markets to grow your wealth.
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Risk Warnings
Investment involves risk. Past performance is not an indicator nor a guarantee of future performance. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down.
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