Investing is inherently uncertain. Countless variables shape global economies and financial markets, many of which are unpredictable and beyond our control. Meanwhile, the media floods us with attention-grabbing headlines, and impulsive investors can sway markets dramatically in short bursts. In such an environment, how should investors respond? How can anyone succeed amid so much noise and uncertainty?
Financial columnist Sam Ro captured the essence of this challenge by breaking the future into three possible scenarios: (1) markets improve and rise in value; (2) markets decline but eventually recover and move higher; or (3) markets decline and never recover. He then noted an important fact: the third scenario has never occurred. And while anything is possible, betting on an outcome that’s never happened may not be a sound investment strategy.1
Planning for Most Likely Outcomes
If Scenario 1 plays out and markets continue climbing from here, the best course of action is clear: remain invested. That one’s easy.
But what if we get Scenario 2? This is when many investors get spooked, selling to protect themselves from further losses, waiting for “better times” before getting back in. But is that wise? Only if you can accurately time the market, which no one can. If markets decline but are expected to recover and move higher (we don’t know when), then isn’t the most responsible approach to stay the course?
The Responsible Choice
History shows that the stock market alternates between Scenario 1 and Scenario 2. Sometimes it rises steadily; other times it declines before eventually recovering. Tending to your “garden,” weeding out the laggards or rebalancing may be necessary. But regardless of which scenario unfolds next, the most effective investment decision has always been the same: act according to your values.
We don’t need to predict the next recession, interest rate move, policy shift, or trade dispute. What we can control is our discipline. And that discipline, sticking to a well-designed strategy through all market conditions, can be surprisingly comforting. If the most likely long-term outcome is that markets will ultimately move higher, then patience, discipline, and ignoring the short-term noise become our most valuable tools.
Stay relentless,
Scott
1Sam Ro, TKER Substack, May 18, 2025
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