Weekly Buzz: How fearful are markets right now?

The market has seen a broad pullback over the last few weeks. Global stocks have declined roughly 3% year-to-date, while global bonds are down about 1%. While it can feel unsettling when different asset classes move down together, these kinds of moves are a natural part of how markets process uncertainty.

What does history tell us?

One way to gauge the market's collective anxiety is CNN's Fear and Greed Index. It tracks seven indicators, including market volatility, trading volume, and demand for safe-haven assets, and scores sentiment on a scale from 0 (maximum fear) to 100 (maximum greed).

As of writing, the index is sitting around the 15-20 range, in fear territory. Readings at either extreme rarely persist for long, though, and the index tends to swing between fear and greed in cycles. Over the past year alone, the index has ranged from single digits to the mid-70s.

A comparable level was in April last year, when Liberation Day tariffs rattled markets and the Fear and Greed Index dropped to a low of 3. Investors then were worried about inflation, slowing growth, and the fallout from a potential trade war. The S&P 500 went on to rally 37% from that April low to November, when the fear index dipped into single digits again.

Today's uncertainty stems from geopolitics, which is often less predictable than trade policy. But geopolitical shocks aren't new: the initial reaction tends to be sharp as uncertainty spikes, then markets stabilise once there's clarity on the economic impact. Importantly, they don't usually wait for conflicts to fully resolve before they recover.

What’s the takeaway for investors?

Periods like this can feel uncomfortable, but they are a normal part of long-term investing. Short-term market stress often creates long-term opportunity. If you're investing consistently, these moments mean your money is buying assets at lower prices. Over time, that discipline tends to work in your favour.

Investor’s Corner: Why the wealthy don’t sell

The most effective long-term investors don't think only about what they earn; they also think about what they hold. That’s because every time you sell, you interrupt compounding. 

Consider two investors: one stays the course while the other sells and re-enters the market periodically, resetting their base each time. Even with identical market returns, the investor who stayed put ends up significantly ahead, simply because more of their money was working for longer.

While many investors feel the need to take profits when things are going well – or to retreat when the going gets tough – it’s important to realise that each rotation comes at a cost. The risk is giving up the momentum of a compounding position to start anew.

A lower turnover approach, where you stay invested in a diversified portfolio and let compounding run uninterrupted, can produce better outcomes over time. Taking action feels productive, but in investing, less is often more. It's a principle the world's most successful investors have practiced for decades: hold, and let time do the work.

That's not to say you should never sell. You're investing for a reason, and drawing down your portfolio when the time comes is part of the plan. The difference is between selling reactively because of market volatility or some external factor, or selling with purpose when it aligns with your long-term financial goals.

(If you’re looking for a diversified portfolio that’s ready-made, check out General Investing.) 

These articles were written in collaboration with Finimize.