I thought that it might be a good time to go back and focus on some fundamentals of investment as we are in a very noisy environment at present!
My first experience of market noise as an investment adviser was September 11, 2001. The New York stock exchange and the NASDAQ were closed for 4 trading days – the longest closure since 1933. When the markets opened on 17 September 2001, the Dow Jones industrial average immediately fell 7.1% which was the largest one day loss in history at that time. By the end of the first week, the Dow Jones had dropped over 14% and the S&P 500 was down by 11.6%.
I remember feeling like the world’s axis had tilted and everything was off balance. I had a friend who worked for Marsh McLennan here in NZ. 385 of her colleagues in New York died that day. The news coverage was like an apocalyptic movie. I, along with a lot of other people wondered how the world would move on after 9/11 and what life would look like.
By 11 October 2001, the S&P 500 had rebounded and recouped all of its losses. By the end of 2001, most major share markets around the world had fully recovered all of their losses.
Since that time, some of the other share market events have included the Iraq war (2003), The Chinese bubble (2007), the global financial crisis (2008/2009), the Euro crisis (2010), the US market crash (2015-2016), the cryptocurrency crash (2018) Covid (2020), the Russian/Ukraine war (2022), and the Liberation day crash (2025). Market “crashes” are a part of everyday investing life.
There are a few key things to remember.
- Noise vs signals
Signals (or trends) denote a continuing market positioning towards or away from a company, or an asset class. Noise is a short term disturbance. Signals can really damage a portfolio if not acted upon. Noise tends to be sensationalised, short term and distract people from their main purpose
2. Long term strategy vs short term headlines
Most investments are established with an end game in mind. For KiwiSaver, this is a first home deposit or a comfortable retirement. For investment portfolios, it can be for retirement, to assist family, to achieve a specific outcome at a specified point in time. Noisy times are good times to refocus on the end game, and make a determined decision to trust the process.
3. This too shall pass.
There are steps that you can take to minimise the noise if it is causing you distress.
Maybe prune back your exposure to information causing you distress. Tune in to the news once a day and maybe read it rather than listen to it. I’m a huge fan of the BBC online as a source of news.
Focus on the things that you can control. Be aware of your petrol consumption and make fewer but more carefully planned outings. I have a client who has recently moved to using public transport and was enjoying the new experience – especially using the bus lanes at peak traffic times!
If you feel that you want to make a hurried or spontaneous decision, negotiate a cooling off time with yourself before you implement it. A lot of rash decisions die in the waiting.
Look at long term investment return charts, especially for broad indexes like the S&P 500 (USA), FTSE 100 (British), DAX (German), NIKKEI (Japan) ASX300 (Australia) and the MSCI World index which captures 85% of the largest and mid size companies around the world. The best broad based NZ index is the NZ50. The long term charts lose the short term noise in the longer term results. Your investments will as well!
Janet Natta is a financial adviser and director of Smart Money Advice, offering investment portfolio construction and management services to clients throughout NZ, as well as comprehensive financial planning advice to assist clients to build and protect wealth to achieve their dreams.
DISCLAIMER: The information contained in this article represents the views of the author. It is based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are given with an express disclaimer of responsibility and no right shall rise against any of the authors or Smart Money Advice or their employees either directly or indirectly out of any views, advice or information.