Younger investors should build positions slowly, while seasoned ones need to focus on capital preservation
Recently, my oldest son expressed an interest in learning about investing — an exciting development for any parent in this business. To provide him with a hands-on experience, I invited him to the office for several days to observe market operations firsthand. It has been particularly interesting to watch his reactions as he prepares to invest in his tax-free savings account (TFSA) amid one of the most volatile market environments we’ve witnessed in years.
Just over a week ago, equity markets experienced a two-day sell-off after U.S. President Donald Trump announced global reciprocal tariffs — the largest since the historic market shocks of October 2008 and March 2020. His immediate reaction was one of relief, expressing gratitude that he had not yet entered the market. At the same time, he thoughtfully questioned whether the sharp pullback might in fact represent a buying opportunity. I was proud of this measured, humble approach — precisely the mindset required of new investors facing unpredictable conditions.
Yet, as markets often do, they turned sharply again. Not long after the sell-off, we saw the largest single-day rally in nearly a century, driven by the announcement of a temporary 90-day reciprocal tariff reprieve on most countries. My son’s mood shifted, concerned he might have missed a crucial entry point, and suggesting that perhaps I was being overly cautious. This emotional whiplash — rising and falling with the latest headline — is an all-too-common experience for investors, particularly in today’s hyper-reactive environment.
The situation evolved further by week’s end. On Friday night, Trump announced exemptions on tariffs for a variety of consumer technology products, including smartphones, computers, and semiconductor components. Media pundits enthusiastically responded with the usual reference to Trump following strategies laid out in The Art of the Deal. However, by Sunday, clarity was fleeting. Commerce Secretary Howard Lutnick explained that while certain products were exempt from reciprocal tariffs, they would still be included under upcoming semiconductor tariffs expected within the next month or two.
This series of rapid reversals left both my son and me — and indeed, much of the market — uncertain. The current investment landscape feels less like a disciplined marketplace and more akin to the Wild West. Political maneuvering, erratic policy decisions and headline risk have introduced extreme volatility, with bond markets pushing back through rising yields and equity indices reacting violently to every piece of breaking news.
In environments like this the temptation is strong for pundits and investors alike to proclaim victory after every significant market move. Yet for every investor celebrating a rally there is another nursing losses on the other side of the trade. Markets influenced by unpredictable political decisions are not suitable for speculation. As I have explained to my son, prudent investors don’t gamble — they assess risk, remain disciplined, and position themselves for sustainable, long-term outcomes.
Bond investor Bill Gross perhaps said it best in a recent post on X: “My portfolio of defensive stocks is green so I don’t begrudge today’s market. But I ask you, would you want to own highly volatile U.S. stocks whose price depends on whether POTUS (President of the United States) had a good night’s sleep and woke up the next morning to reverse yesterday’s policies?”
Navigating such conditions demands adaptability, patience and strategic foresight. For younger investors, such as my son, the focus should remain on building positions gradually, using market pullbacks as opportunities while adhering to a disciplined, long-term plan. Quality, flexibility, and discipline are key in these markets.
For more seasoned investors, capital preservation becomes paramount. It is tempting to chase short-term rallies, but wisdom lies in remaining anchored to defensive, stable sectors, while keeping an opportunistic eye on deeply oversold areas poised to benefit when market stability eventually returns.
As I reminded my son, this process is never easy — but investing was never meant to be. Avoiding the dangerous mentality of “I’m right and the market is wrong” is essential. Markets are indifferent to our opinions. Diversification across global markets, defensive sectors and innovative structures such as structured notes continues to be a fundamental strategy. With a balanced, disciplined approach, even today’s volatile, unpredictable market can transform from a chaotic Wild West into fertile ground for future opportunity.
