In normal times it’s hard to know who or what to believe. While the stock market tends to go up in the long run, over shorter periods its spikes and plunges can be very unsettling. Wartime further complicates everything, and the ripples of expensive oil mean every headline has the power to whipsaw the market. The first quarter of 2026 certainly reminded investors that progress in markets rarely follows a straight line and offered another reminder that investors rarely enjoy a perfectly calm backdrop. Geopolitical tension, policy uncertainty, and shifting economic headlines once again competed for attention while working together to add to volatility. Yet for long-term owners of strong businesses, this environment is not unusual. One of the most persistent lessons in market history is that stocks have repeatedly demonstrated an ability to absorb unsettling world events and move forward over time.
Periods like this can feel uncomfortable in real time since media headlines are designed to capture immediate attention, while successful investing requires patience. Markets often react quickly to war, terrorism, trade disputes, energy price spikes, and political instability, but history shows those reactions have usually been temporary unless accompanied by a lasting shock to economic fundamentals. In many instances, it creates opportunities as well. Bearing this in mind, we are reminded the economic data in the first quarter painted a picture of an expansion that was slowing but still intact. Labor markets in the U.S. have cooled from their earlier strength but remain relatively healthy, with unemployment drifting higher while staying in a range historically consistent with ongoing growth.
For us, the stock market is not, or shouldn’t be, a scorecard of this week’s anxiety — it is a forward-looking mechanism continuously weighing the future prospects and earnings power of businesses. When markets conclude that a global event is serious, but unlikely to permanently impair the long-term cash flows of a broad range of companies, prices often stabilize well before the headlines improve.
This is not to dismiss the seriousness of geopolitical conflict. Human consequences should always come first, and economic effects can be real. Higher commodity prices, changes in trade flows, and short-term volatility all influence markets. But over many decades, diversified equity investors have been rewarded for remembering that businesses adapt, consumers adjust, and capital tends to find its way toward resilience and opportunity – often better than we could have predicted.
The broader economic backdrop also appears more durable than the daily news flow might suggest. In its January 2026 update, the IMF projected global growth of 3.3% for 2026, describing the world economy as steady amid divergent forces, with technology investment, policy support, and private-sector adaptability helping to offset trade and geopolitical pressures. Although not implying a smooth path, it does suggest the global economy continues to show an ability to adjust rather than stall.
For investors, the practical implication is straightforward — avoid confusing uncertainty with permanent impairment. Equity investing has always involved periods when the news feels worse than the long-term outcome eventually proves to be. Selling high quality businesses during moments of fear may offer emotional relief, but it has historically been a poor substitute for patience, discipline, and a focus on underlying value. We are especially attracted to quality businesses that have been “thrown out with the bath water” during trying times.
We find it important to build a portfolio for difficult environments and not just for calm periods when optimism is easy. A sound investment plan assumes markets will periodically face wars, political tension, recessions, policy mistakes, and unexpected shocks. The objective is not to predict these events, but to own durable businesses, maintain appropriate diversification, and allow time and compounding to do their work.
As always, near-term market movements are likely to be uneven. Volatility is the price investors pay for the superior long-term return potential of equities and history suggests the discipline to stay invested through unsettling periods has been one of the most reliable advantages available to long-term investors.