By Tim Courtney, Chief Investment Officer

Future events are unknowable, but today’s market prices can give us insight into what the market and its millions of participants are guessing about the future. In 2025, we’ve had war and we’ve had changing economic policy, but markets have reacted very differently to each of these events. The market barely moved following the bombing of Iranian nuclear sites, but volatility quadrupled following tariff announcements.¹

In decades past, an armed conflict in an oil-producing region would have meaningfully moved markets and oil prices. This time, the reaction was muted. Volatility actually declined, and equity returns ticked up slightly.² This isn’t the first time we’ve seen this pattern. Neither the start of the Russia-Ukraine war in 2022, nor the conflict between Israel and Palestine caused any lasting market disruption.³

Now, compare that to the market’s response to policy shifts. In April, the administration’s talk of tariffs caused daily market swings as high as 7%.⁴ And we’ve seen that kind of reaction more frequently in recent years. The COVID crash in early 2020, for example, started with fear about the virus itself. But the real story came after policymakers responded with shutdowns followed by injecting trillions of dollars into the economy. By June of 2020, the U.S. had allocated 12.1% of its GDP to COVID relief, more than double the federal stimulus deployed in the 2008 financial crisis.⁵ Markets fell hard, then rallied strongly based on policy.⁶

The same thing happened in reverse in 2022. The Federal Reserve began raising interest rates to claw back COVID stimulus. Stocks fell, and bonds had their worst year in a century.⁷ This is the same year as Russia’s invasion of Ukraine. But it was a policy shift, not war, that triggered a year of dismal market performance.

Even though policies have had an outsized impact on market behavior over the last several years, it is still difficult to effectively time trades around these events. This is because we can’t know which events will have major, long-term repercussions or how parties may ultimately react to changes. Markets will make an initial guess as to how events may settle and will adjust and readjust as the picture becomes clearer. Despite initial declines, within a matter of weeks most of the market was back to where it had started the year.⁸

Rather than betting on the unknowable and trading based on headlines, a disciplined investor bases trading decisions on prices. The market quickly incorporates news into an initial “guess” and reflects this into prices. The disciplined investor will decide whether or not to act on those new prices.

As Benjamin Graham put it, sometimes it makes sense to accept “Mr. Market’s” current prices to buy, sell or rebalance.⁹ Most of the time though, it is best to take no action at all. Most often, the best way to capture market returns is to stay in our seats, even when policy shocks or events outside our control move markets. An Exencial advisor is always available to answer any questions you may have.

Sources:

1. Reuters (4/7/25) – Stocks Plunge on Tariff Turmoil, VIX Fear Gauge Spikes
2. Axios (6/23/25) - Oil Market's Ho-Hum Response to Iran Strike Seen As "Remarkable"
3. Investopedia (10/11/2023) - How War Affects the Modern Stock Market
4. Investing.com - (6/2/25) Tariffs, Turmoil, and the VIX: How April 2025 Compares to Past Crises?
5. McKinsey & Company (6/11/2020) - Total Stimulus for the COVID-19 Crisis Already Triple that for the Entire 2008–09 Recession
6. CBS News (3/23/2021) - How Did the Pandemic Usher in One of the Stock Market's Greatest Runs?
7. The New York Times (12/9/2022) – After a Terrible Year for Bonds, the Outlook Is Better
8. MarketWatch (May 1, 2025) - Stock Market’s Rapid Rebound from Tariff-Inspired Rout Stuns Wall Street. But There Were Signs This Would Happen.
9. Harper Collins Publishers (20026) The Intelligent Investor, Rev. Ed

PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE RETURNS. Information and opinions provided herein reflect the views of the author as of the publication date of this article. Such views and opinions are subject to change at any point and without notice. Some of the information provided herein was obtained from third-party sources believed to be reliable but such information is not guaranteed to be accurate. In addition, the links provided within are for convenience only and the provision of the links does not imply any sponsorship, endorsement, or approval of any of the content. We do not guarantee the content or its accuracy and completeness. The content is being provided for informational purposes only, and nothing within is, or is intended to constitute, investment, tax, or legal advice or a recommendation to buy or sell any types of securities or investments. The author has not taken into account the investment objectives, financial situation, or particular needs of any individual investor. Any forward-looking statements or forecasts are based on assumptions only, and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Any assumptions and projections displayed are estimates, hypothetical in nature, and meant to serve solely as a guideline. No investment decision should be made based solely on any information provided herein and the author is not responsible for the consequences of any decisions or actions taken as a result of information provided in this book. There is a risk of loss from an investment in securities, including the risk of total loss of principal, which an investor will need to be prepared to bear. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Exencial Wealth Advisors, LLC (“EWA”) is an investment adviser registered with the Securities & Exchange Commission (SEC). However, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. EWA may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Complete information about our services and fees is contained in our Form ADV Part 2A (Disclosure Brochure), a copy of which can be obtained at www.adviserinfo.sec.gov or by calling us at 888-478-1971.