Emily Keenan

Market volatility can be uncomfortable—but it’s not unusual. In fact, it’s a feature of investing, not a flaw.

Donald Trump has shocked the global markets over the past week since his Liberation Day tariff announcement. At the time of writing, the global stock market has fallen over 5% from the start of 2025, with the S&P500 down over 8% over the same time period.

However, the market decline of 3^rd & 4^th April is only the 39^th largest drop since 1^st January 2000.

During times of uncertainty, remaining invested in a globally diversified, suitable portfolio is not just prudent—it’s essential for long-term financial success.

Timing the Market is Risky—and Rarely Successful

Attempting to move in and out of markets to avoid downturns may seem appealing, but missing just a few of the best-performing days can significantly erode your returns. The cost of mistiming the market far outweighs the perceived benefit of “playing it safe.”

Casting our minds back to the Covid-19 pandemic the US stock market dropped 34 % in just 23 days — faster than ever before. Yet within a year, the market had not only recovered but also risen 78% from its lowest point. People who sold during the panic missed one of the strongest recoveries ever.

Volatility Happens Every Year

Every single year, global markets experience drawdowns—temporary declines from peak levels. These drops are normal. Intra-year declines are part of investing, yet more often than not markets tend to end the year in positive territory.

This volatility is expected and already considered in the assumptions behind your plan.

Patience is a Proven Strategy

History has consistently rewarded investors who stay calm, remain disciplined, and stick to their long-term strategy.

The chart below shows the growth in world equity markets despite the never-ending stream of negative world events – The Wall of Worry

Reacting emotionally to short-term noise can lead to poor outcomes—while staying the course is the key to wealth preservation and growth.

Your Financial Plan Already Accounts for Market Drops

We have built your financial plan with these events in mind. Our assumptions used in your plan factors in the reality of market downturns.

As part of our planning for those who require income in retirement, we include Defensive Assets – Government Bonds. This helps to protect capital value of this income, typically 5-7 years worth of income. This prevents the need to sell during a market downturn.

As always, we are here to support you, answer questions, and ensure your plan remains aligned with your goals—no matter what the markets are doing.

The declines are temporary, the long term advance is permanent.

Stick to the plan.

This shiny metal always glistens most brightly when it has just risen in value. In the past 12 months, the price of gold has nearly doubled. Recency bias and the fear of missing out (FOMO) always results in ‘should it be in my portfolio?’ type questions.  Somewhat bizarrely, investors tend to get excited about assets that have already risen in value.  If one is going to play a market timing game – generally not advisable as even the pros do not have any real track record in being able to do so consistently – a long-term investor should surely be more excited about an asset that has fallen substantially in value, not risen.

It is always too easy to jump onto the ‘it’s done so well, I want some’ bandwagon. After all, owning a gold-backed ETF is just a click away on a brokerage account.  Switching from an emotional, intuitive brain to a more reflective mindset is always useful to avoid a hasty and potentially costly decision. Here are a few thoughts around gold that may be instructive or, at the very least, somewhat interesting.

Gold is in limited supply (on earth), but does this matter?

If all the gold ever mined were melted into a cube, it would measure just 22 meters on each side.  For those keen on rugby, the base of the cube would reach from the try line to the 22m line.  For tennis fans, the sides of the cube would be as long as a tennis court, give or take a meter.  According to the World Gold Council, this represents 216,265 tonnes of gold mined so far.  Unmined gold is estimated at around 50,000 tonnes. Investors who think that gold is out of this world would be right. Gold is created in the heart of massive stars during supernova explosions which produce the extreme conditions necessary for the formation of heavy elements like gold. Meteorites often contain small amounts of gold. Does that make it valuable?  Warren Buffet, the legendary investor and founder of Berkshire Hathaway does not think so.

‘Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head…Gold, however, has two significant shortcomings, being neither of much use nor procreative… if you own one ounce of gold for an eternity, you will still own one ounce at its end’.

Warren Buffet, Legendary Investor & Founder of Berkshire Hathaway

Gold has a tarnished record as an inflation hedge

Despite being the only metal that does not corrode, its mythical reputation as a hedge against inflation is somewhat tarnished.  The definition of an inflation hedge is an asset that moves in the opposite direction to the effect of inflation, not just an asset that delivers positive after-inflation returns over longer-term periods.  Historically, gold has shown mixed results as an inflation hedge. During the 1970s, a period of high inflation in the U.S., gold prices soared, delivering impressive after-inflation returns. However, in other periods, gold’s performance has been less stellar. For example, from 1980 to 1984, despite high inflation, gold prices fell substantially.  Other alternatives, such as owning shorter-dated inflation-linked bonds is likely (but not guaranteed) to offer a better direct and more immediate hedge against inflation.

Figure 1: Gold prices compared to inflation and other assets 1-1970 to 2-2025

Source: Albion Strategic Consulting. Data: Morningstar Direct © All rights reserved (see endnote)

Gold has not performed that well against other assets

Gold has not been a particularly strong performer relative to global stocks over the past 50 years, despite its rip-roaring start to the 1970s.  After the effects of inflation, £1 turned into £7 of purchasing power for gold, £3 for UK house prices and £16 for global stocks. It would have been painful to remove global stocks from a portfolio to make way for gold.  In addition, the gold price was quite a bit more volatile than that of global stock markets, by about a quarter in fact.

Gold is a good store of value if you have a 2,000-year horizon, but not in the shorter term

Over the period from January 1980 to July 1999, gold lost around a staggering 80% of its purchasing power, making it a very untrustworthy store of value even over decades. Over the same period, the purchasing power of global stocks rose seven-fold.  Over millennia gold does, however, seem to be a good store of value!  For example, 34 ounces of gold would have paid the salary of a Roman centurion or a British Army captain today.  A pair of shoes then, and now, cost around 0.02 ounces of gold, whilst two Roman togas or a suit today would cost about the same[1].  Interesting but largely irrelevant to investors.

Timing when to invest in gold is tricky – just ask Gordon Brown 

In summary, gold has no income stream, making it hard to value.  Supply and demand changes over time, depending upon a wide range of factors, which are largely unpredictable.  Its longer-term return has been materially less than that of global stocks.  Its mythical status as a hedge against inflation is wearing a bit thin. It is hard to make a case for it as a permanent part of a portfolio.  That implies that an investor needs to time when to be in or out of gold, which has proven to be extremely difficult. Just ask Gordon Brown, the former Chancellor of the Exchequer in the UK. Between 1999 and 2002, he sold approximately 395 tonnes of the UK’s gold reserves at average price of USD275 per ounce, a multi-decade low in the gold price, leading to significant criticism and the term ‘Brown’s Bottom’! If he had sold the gold at today’s prices, it would have been worth around ten times as much.  This is probably one of the biggest single market timing mistakes of all time.  Caveat emptor! All that glistens…etc.

Important Notes

This is a purely educational document to discuss some general investment related issues. It does not in any way constitute investment advice or arranging investments. It is for information purposes only; any information contained within them is the opinion of the authors, which can change without notice. Past financial performance is no guarantee of future results.

Use of Morningstar Direct© Data

© Morningstar 2025. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied, adapted or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past financial performance is no guarantee of future results.

Products Referred to in this Document

Where specific products are referred to in this document, it is solely to provide educational insight into the topic being discussed. Any analysis undertaken does not represent due diligence on, or recommendation of any product under any circumstances and should not be construed as such.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Portfolio performance data are for illustrative, educational purposes only and do not represent live client portfolios.

Asset Classes Used

[1] Reitzer, L., (2023) Wages & Prices of Daily Goods in Ancient Rome. Wages & Prices of Daily Goods in Ancient Rome – neutralhistory.com. Accessed: 17-03-2025

[2] https://smartersuccess.net/indices

Five Key Probabilities for Investment Success

In life we make probability-driven choices all the time (can I cross the road safely, despite that approaching car? etc.). By-and-large, we weigh up the uncertainty involved, the upside on offer and then dive right in.  Not all our decisions are optimal.  Did we understand the risks fully? Did we know what the up and downside consequences were and, importantly, the likelihood of them happening?

When it comes to investing, we face similar challenges, but fortunately we have a wealth of market data and evidence to help us make better informed decisions around where the probability of success lies.  To avoid the serious consequences of getting it wrong, e.g. building too small a pot to retire comfortably on, or running out of money in retirement, there are five key probability-based choices to focus on.

Key Probability 1: Stocks are likely to beat cash over most 20-year horizons

Using a long-run global stock market data set, the evidence suggests that over 98% of the time, stocks beat cash over a 20-year timeframe. Most investors have investment horizons of at least that. Over the period Feb-55 to Sep-24 stocks delivered around 5.6% above inflation against 1.2% for cash.  There are no guarantees, but the odds are stacked in your favour.

Figure 1: Stocks are likely to beat cash over time

Source: Albion World Stock Market Index versus UK One Month Treasury Bills

Conclusion: Make sure you invest.  For most long-term investors a substantial holding in stocks makes good sense.  What that level is will depend on your personal circumstances.

Key Probability 2: Owning the market, over trying to be too clever, is likely to pay off

Investment theory suggests that markets work well at incorporating information into securities prices.  In other words, there are few £20 notes lying around on the investment pavement to be scooped up by professional fund managers and other investors, to allow them to beat the market.  Empirical data show that very few professionally managed funds beat the market, and even fewer with any proven degree of skill.

Figure 2: Only 5% of global equity funds beat the market over 20 years

Source: Albion GAME^TM 24.5 – global equity funds to June 2024.

Conclusion: Holding the market and capturing the returns on offer should be your overriding priority, rather than trying to pick fund managers who claim to be able to beat the market. Even if they appear to have track records suggesting they can, are they just lucky or skilled?  You need decades of results to work out which. Play the odds overwhelmingly in your favour.

Key Probability 3: Diversification is likely to deliver a better outcome than concentration 

Research shows that the entire wealth created in the US equity market since 1926 has been driven by just 4% of companies.  The story is similar for global markets. As evidenced above, few professional fund managers can spot these companies in advance. Holding a concentrated portfolio of ‘guesses’ is less likely to lead to a worse outcome than the broad market. In general, diversification helps to smooth the returns of a portfolio as some investments zig while others zag. Some concentrated portfolios may get lucky, but that’s a gamble.

Figure 3: US 1926-2015 – only a handful of companies created all the wealth

Source: Bessembinder, H. (2018). Do stocks outperform Treasury bills? Journal of Financial Economics, 129(3), 440–457. https://doi.org/10.1016/J.JFINECO.2018.06.004

Conclusion: This suggests that being well-diversified is likely to play out in your favour. It ensures that the wealth creators of the future will be held in your portfolio. You might get lucky with a concentrated portfolio, but the odds are not in your favour.

Key Probability 4: Holding sensible exposures to well-researched risk factors should pay off

Not all equities have the same risk.  Behemoths, such as Microsoft and Apple, are very different to smaller companies. Rapidly growing companies are very different to stocks that are less financially healthy.  The market prices these shares accordingly.  The historical evidence suggests that, on a relative basis, companies that are smaller and/or less financially healthy, are cheaper than larger companies and rapidly growing companies. They are cheaper for a reason – they are riskier.  The flip side of the coin is that this higher risk is expected to deliver higher returns over time.

Figure 4: The chances of capturing excess returns improves over time

Source: Ken French Data Library – US three factor model[1]

Conclusion: For investors with longer horizons, taking on these additional risks has a higher expected chance of paying off.  Incremental returns compounded over time could make a material difference to outcomes. 

Key Probability 5: Reducing costs is likely to deliver higher returns

As a general theme, lower costs of investing are better than higher costs. As an example, take two global equity funds that before costs deliver a return of 5% per annum.  Fund A has an ‘all-in’ cost of 1% and Fund B 0.30%. Over 30 years the investor in Fund B will accumulate 24% more wealth than the investor in Fund A.

Figure 5: Lower costs improve the chances of better outcomes.

Source: Albion Strategic Consulting. Professor William Sharpe’s Terminal Wealth Ratio.

Conclusion: Keep a keen eye on costs.  The cost-to-outcome relationship is real and important in investing. Lower cost solutions will, in all likelihood, improve your chances of a good investment outcome, all other things equal.

In all likelihood…

Investors who play the probabilities in their favour deserve – and are likely to experience -better investment outcomes than those who fail to do so.  Do not gamble on your future.

Important Notes

This is a purely educational document to discuss some general investment related issues. It does not in any way constitute investment advice or arranging investments. It is for information purposes only; any information contained within them is the opinion of the authors, which can change without notice. Past financial performance is no guarantee of future results.

Products Referred to in this Document

Where specific products are referred to in this document, it is solely to provide educational insight into the topic being discussed. Any analysis undertaken does not represent due diligence on or recommendation of any product under any circumstances and should not be construed as such.

[1]https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/f-f_factors.html

As the year draws to a close, 2024 truly has been the year of elections. This year, it was forecasted that more voters than ever, across 64 countries, would head to the polls to cast their votes on the future leadership of their countries[1].

The Presidential election in the US, as a significant global power and a dominant exposure in investors’ portfolios, naturally gathered a lot of attention. Donald Trump’s resounding victory saw him not only claim the White House but the coveted trifecta – the presidency plus both chambers of Congress (the House and the Senate). Regardless of one’s political or economic views, the world will be keeping a close eye on what comes next for the US.

In stock markets, investors are constantly casting their own ‘votes’ in anticipation of what they feel the future holds, some more optimistic, some more pessimistic. The aggregated view of all investors leads to a consensus in the form of the current market price. All known information has already been accounted for in today’s market prices, and these prices will only move further on the release of new information which is, by definition, random.

There are, of course, those that will disagree with today’s market price and try to reposition a portfolio to harness perceived opportunities. Unfortunately, the evidence suggests few possess any ability to do so successfully and consistently through time[2].

Diversification – that is, spreading eggs across baskets – is a central pillar to our investment philosophy. We ensure that diversification is not only achieved across countries but also within them. Exposure to any particular region, including the US, extends beyond the biggest companies in the market through the use of systematic tilts to smaller companies and value companies (those with low prices relative to their fundamental measures such as book value or sales).

Different areas of the market perform strongly at different times – unfortunately there is no way of knowing which will be next, in advance. In the US, the past decade has been dominated by large tech-based stocks. The next decade may be entirely different. Or it may not.

The ‘lost decade’ of 2000-2009 highlights this point well, known as a time period where the US stock market delivered little back to investors. The decade saw the S&P 500 deliver a period of negative returns, as highlighted in the chart below. The Dot-Com Crash of the early 00s, followed by the Global Financial Crisis meant for tough times.

That being said, it was not all doom and gloom. Those with incremental tilts to smaller and value companies benefitted from the diversification these exposures offered, as parts of the market that delivered materially positive returns. Those driven to omit large US companies from their portfolio on the basis of this poor performance would have missed out on the strong performance that has come to pass since.

Figure 1: The lost decade, where not all was lost

Source: Dimensional Returns web: US value: Fama/French US Value Research Index and US small: Fama/French US Small Cap Research Index. Morningstar: US equity: Vanguard U.S. 500 stk idx $ Acc. Returns in GBP.

Large US stocks are typically the dominant part of investors’ portfolios. The fact that this part of the market has delivered strong returns is therefore good news and has helped investors experience returns that lend well to being able to achieve one’s financial goals. Pining after more return on seeing strong stock market performance in regions such as the US is best avoided and can lead to wealth-destroying behaviour such as performance chasing.

No-one truly knows what the future holds. Keeping focused on the long-term, remaining diversified and having consistent exposure within each region continues to be the best line of defense – and provides the best opportunity – for whatever lies ahead.

Important Notes

This is a purely educational document to discuss some general investment related issues. It does not in any way constitute investment advice or arranging investments. It is for information purposes only; any information contained within them is the opinion of the authors, which can change without notice. Past financial performance is no guarantee of future results.

Products Referred to in this Document 

Where specific products are referred to in this document, it is solely to provide educational insight into the topic being discussed. Any analysis undertaken does not represent due diligence on or recommendation of any product under any circumstances and should not be construed as such.

[1] Time.com

[2] Albion’s latest GAME study highlights this point with only 3% of active managers managing to outperform their benchmark over the last 20 years. Albion Governance Update 28. Period of 20 years ending June 2024. Global equities asset class.

Another four years have flown by, and here we are again, on the morning of the 60th U.S. presidential election.

The U.S. president is often considered one of the world’s most powerful figures, wielding substantial influence over the world’s largest economy and one of its most formidable militaries, albeit limited by a system of checks and balances through Congress. Perhaps it is understandable that the media, politicians, celebrities and business owners alike wish to make their voice heard during campaign season… it is noisy time of year!

At the time of writing, the race remains extremely close. Former President Donald Trump is pursuing a second term for the Republicans, while Vice President Kamala Harris hopes to make history as the first female president for the Democrats. Polls and betting markets are sharply divided; predictive sources like The Economist and other major polls lean toward a Harris victory[1], yet many prominent bookmakers see Trump as the frontrunner[2].

It has been a roller coaster, what with President Biden’s withdrawal from the race, an assassination attempt that thankfully failed, Elon Musk coming in to bat for Trump and Taylor Swift for Harris, and the usual fierce partisanship from both sides. One way or another, we will soon wake to the news of the victor and the serving president for the next four years.

For investors, it is natural at times of political uncertainty to wonder whether they ought to act, perhaps altering their portfolio to position for a specific outcome, or to move money into cash deposits until things ‘settle down’. Some choose to invest this way, mostly at their peril, as very few managers possess the ability to consistently predict such events[1].

A better strategy, as is adopted in your portfolio, is to outsource this guesswork to the market itself, relying on the millions of daily participants to come up with their expectations and reflect them in prices. Thankfully, given both democrats and republicans support capitalism and believe in personal freedom and property rights, this strategy is a tried and tested approach to investing.

The chart below shows the Global equity market return over the last century or so, where the colours represent whether the sitting US president was Republican (red) or Democratic (blue) at the time. There is little to draw from the red and blue sections, both parties have resided over some fantastic periods, and some not so fantastic ones. However, the ability of capitalism to create wealth despite the ups and downs is evident, with $1 invested in 1926 becoming nearly $10,000 by 2024.

Figure 1: Democratic (blue) and Republican (red) Presidents and equity market returns

Source: Dimensional Returns. Index: Albion World Stock Market Index[1]. Date: 07/26-09/24. Returns in USD.

The challenge is that it is not enough to know what the outcome of this election will be, one also needs to know – without the benefit of hindsight – how the market will react once the event occurs. Would a Trump victory be good or bad for markets? What about a Harris win? Answering these questions is akin to guesswork, despite what some of the financial press might have us believe.

Whilst guessing against randomness is impossible, taking on the known risk that equity returns are far less certain than holding cash rewards investors who ignore this short-term noise and focus on the long-term.  The choice of the US President is important to some, but to the long-term investor it is largely irrelevant.

“He who lives by the crystal ball will eat shattered glass.”

Ray Dalio, CIO of Bridgewater Associates

Important Notes

This is a purely educational document to discuss some general investment related issues. It does not in any way constitute investment advice or arranging investments. It is for information purposes only; any information contained within them is the opinion of the authors, which can change without notice. Past financial performance is no guarantee of future results.

Products Referred to in this Document 

Where specific products are referred to in this document, it is solely to provide educational insight into the topic being discussed. Any analysis undertaken does not represent due diligence on or recommendation of any product under any circumstances and should not be construed as such.

[1] The Economist (2024). https://www.economist.com/interactive/us-2024-election/prediction-model/president

[2] Oddschecker – US Presidential Election. https://www.oddschecker.com/politics/us-politics/us-presidential-election/winner

[3] Albion GAME^TM 24.5 – 90% of US equity fund managers were beaten by the MSCI USA IMI Index 20Y to Jun-24.

[4] https://smartersuccess.net/indices