Recent headlines from home and abroad have painted a somewhat chaotic picture.
The UK has just inaugurated its seventh prime minister in a decade, geopolitical tensions have been mounting in the Middle East, and there is ongoing uncertainty regarding the growth of AI and technology markets.
If you were to read the news, you would be forgiven for assuming markets had been in turmoil. However, despite some fluctuations, markets have delivered strong returns so far this year.
Read on to find out why reacting to headlines could be holding you back from long-term growth.
The recent change in prime minister is unlikely to have a lasting effect on markets
Political uncertainty and changes in government often lead to short-term market fluctuations, as investors react to new policies, economic priorities, and uncertainty about what comes next.
Indeed, Morningstar reports that UK government bond prices fell and the pound dipped against the euro and dollar in the first 24 hours of Andy Burnham’s tenure as prime minister.
However, this kind of market movement is entirely normal following a change in government. Initial reactions are often driven by short-term uncertainty, and markets have historically gone on to deliver strong returns under governments of every political persuasion.
The graph below shows the growth of £1 in the UK stock market from 1900 to the present day, alongside which political party was in power at the time.
Source: Blincoe
As you can see, the market has fluctuated considerably over the past century, regardless of who is in power, but it has grown significantly over that time.
So, it’s more important to remain focused on your long-term goals than to react to short-term political events, even if the initial market movements are unnerving.
Despite ongoing uncertainty abroad, markets have delivered strong returns in the year so far
Beyond political change at home, there has also been significant uncertainty overseas.
The conflict involving the US, Israel, and Iran has raised concerns about the stability of the Middle East and the potential impact on global energy supplies. In particular, fears over disruption to the Strait of Hormuz led to considerable market volatility, and the S&P 500 initially fell by over 7%.
At the same time, questions over the performance of stocks in the AI and technology sectors have continued to unsettle investors, with changing expectations around regulation and future growth contributing to periods of turbulence.
Despite this uncertainty, markets have delivered strong returns so far this year.
The table below shows the annual performance of major global indices from 2017 to 2025, and then the year-to-date and Q2 performance in 2026.
Source: JP Morgan
As you can see, market performance in 2026 so far has been strong, with many indices performing better in the first half of the year than in previous full years, though of course, performance could still dip.
So, while geopolitical events and economic uncertainty can create short-term volatility, markets have continued to perform well so far this year.
Indeed, history shows that markets have repeatedly demonstrated their ability to recover and grow over the long term and that diversification can help smooth your path.
For instance, if you had been overly exposed to the UK FTSE All-Share in 2020 and had no equities in the MSCI Asia ex-Japan, you would have likely seen a considerable drop-off. However, the following year, the FTSE All-Share made gains of 18.3%, while the MSCI Asia dropped by 4.5%.
The key isn’t to try to predict which index will do well in which year. Rather, it’s typically best to diversify your portfolio across different regions, sectors, and asset classes to help smooth your long-term returns.
Returns are often strongest after periods of uncertainty
Not only have markets historically continued to deliver growth over the long term despite periods of short-term volatility, but some of their strongest returns have also come in the aftermath of market falls.
This is because investor confidence often recovers before the wider economic picture has fully improved.
The chart below shows the losses during some of the biggest market crashes of the last 40 years, followed by the returns experienced over the next 12 months.
Source: Forbes
As uncertainty begins to ease, markets can rebound quickly, meaning investors who sell during periods of turbulence risk missing some of the strongest days of recovery.
Trying to predict exactly when markets will fall or recover is extremely difficult. In most cases, remaining invested and focused on your long-term plan is more effective than reacting to short-term movements.
Get in touch
It can be difficult not to react to headlines, but historical performance shows that it’s not a good idea. However, maintaining composure and resilience can be easier said than done.
A financial planner can help you remain disciplined and calm amid significant noise. They can also work with you to create a plan that’s built to remain stable during periods of volatility.
To speak to a financial planner, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
