The Biggest Risk Isn’t the News. It’s Investors’ Reaction to It
The start of the year has brought no shortage of headlines. Developments in Venezuela, renewed debate around Federal Reserve independence, rising rhetoric involving Iran, and ongoing discussions around domestic policy have kept the news cycle busy. For many investors, it can feel like a lot to process.
But it’s worth remembering that markets do not become unsettled simply because the news is active. Markets have always operated alongside geopolitical tension, policy debate, and political change. What matters more is whether those developments meaningfully alter the outlook for economic growth, corporate earnings, or financial conditions.
And so far, the evidence suggests the broader expansion remains intact as we look toward 2026.
In fact, noisy news cycles often serve as a useful reminder of how resilient markets can be. Uncertainty does not automatically translate into poor outcomes, and history shows that investors who remain focused on fundamentals tend to fare better than those who allow headlines to drive decisions.
Last year provided a timely example. The market’s selloff near the end of the first quarter was steep and sudden, particularly following the April 2 “Liberation Day” tariff announcement. Sentiment deteriorated quickly as investors attempted to price in worst-case scenarios. At the time, I urged patience and cautioned against knee-jerk reactions. Within roughly twelve weeks, the S&P 500 had recovered and moved back to all-time highs. The episode reminded us that headline-driven pullbacks can happen quickly, but so can recoveries when fundamentals remain sound.
That experience also highlights why investor behavior matters most during active news cycles. Headlines can temporarily pull attention away from earnings, growth, and positive fundamentals, creating openings for emotional responses that aren’t always aligned with long-term goals. The challenge isn’t staying informed—it’s staying disciplined.
One common pitfall is recency and availability bias, which is the tendency to overweight what is most recent or emotionally charged. When a specific event dominates coverage, it can feel disproportionately important to markets even when its economic footprint is relatively small. Venezuela is a good illustration. While the situation is complex and evolving, the country represents a tiny share of global economic output; any potential effects on global oil markets would likely take years to materialize, not months. Markets tend to recognize quickly that scale matters more than narratives.
Confirmation bias can also creep in during periods of policy debate. Investors naturally gravitate toward narratives that reinforce their existing views, treating headlines as validation rather than data points to be weighed objectively. The discussion around Federal Reserve independence is a case in point. While the debate has drawn attention, markets have historically focused less on commentary and more on institutional credibility, policy transmission, and economic outcomes. Separating narrative from impact remains essential.
Then there is action bias, which is when investors equate “doing something” with positive progress. In fast-moving environments, trading can feel like regaining control. But excessive, emotionally driven activity has long been one of the most consistent drags on returns. Successful investing often means allowing a well-constructed strategy to work, rather than trying to respond to every development along the way.
What tends to serve investors best in moments like this is not predicting the next headline, but reaffirming their long-term plan. Remember, markets do not require calm conditions to function, and perfect foresight has never been a prerequisite for success. Over time, markets have rewarded investors who remain invested, maintain perspective, and avoid letting emotions dictate strategy.
Bottom Line for Investors
Periods of heightened uncertainty are not necessarily periods of heightened risk.
More often, noisy news cycles are remembered as moments when investor behavior plays a larger role in determining outcomes. Today’s headlines—whether geopolitical, monetary, or political—may feel prominent, but markets ultimately respond to earnings, growth, and fundamentals. As last year’s tariff-driven volatility demonstrated, markets can adapt to new information far faster than emotions can recalibrate.
Maintaining discipline, sticking to a plan, and staying focused on what truly drives long-term returns remain among the most effective ways for investors to navigate any environment, including the current one.
Disclosure