When Markets Move, Should Your Investment Strategy Move With Them?
Updated: Sep 1
Recent months have given investors plenty to think about.
Geopolitical uncertainty, changing expectations around interest rates, volatile energy prices and shifting economic forecasts have all provided plenty of material for financial headlines.
In July, the Bank of England held Bank Rate at 3.75%, while highlighting continued uncertainty around energy prices and the wider economic outlook. Events such as these can affect investment markets quickly, sometimes creating significant movements over relatively short periods.
For investors, periods of uncertainty can lead to an understandable question: should I be doing something?
While markets can move remarkably quickly, however, a well-constructed long-term financial plan generally shouldn't move with every headline.
Market movements are part of investing
Investment markets have always experienced periods of growth and decline.
Political events, interest rates, inflation, economic data, company performance and investor sentiment can all influence prices. Some of these factors develop gradually, while others can cause markets to react within hours.
Those movements can feel much more significant when you're watching them happen.
A fall in the value of a portfolio is no longer an abstract percentage on a chart when it represents money you've spent years building, particularly if you're approaching retirement or relying on your investments to support your lifestyle.
It's understandable, therefore, that periods of volatility can create an urge to take action.
The difficulty is that reacting to what has already happened requires making another decision too: what happens next?
The difficulty with trying to time the market
Selling investments following a significant fall may feel like a way of preventing further losses. However, selling crystallises that loss and also creates another difficult decision: when to invest again.
Market recoveries don't usually arrive with advance warning.
Periods of strong and weak market performance can occur close together, meaning an investor who moves into cash and waits for conditions to feel more comfortable could miss part of a subsequent recovery. Of course, markets can also continue to fall and there is no guarantee of when, or to what extent, values will recover.
The opposite temptation can arise when markets are performing particularly strongly.
Recent returns can make a particular company, sector, geographical region or type of investment appear especially attractive, encouraging investors to concentrate more of their money there after a period of strong performance.
Neither recent growth nor recent falls tell us with certainty what will happen next.
This is why investment decisions based primarily on short-term market movements can be so difficult. They require investors not only to decide when to make a change, but potentially when to reverse that decision too.
Your investment strategy should start with you, not the headlines
This is where financial planning and investment management need to work together.
The purpose of an investment portfolio isn't simply to achieve the highest possible return each year. Investments should sit within a wider plan based on what you want your money ultimately to help you achieve.
That means considering factors such as:
how long your money is likely to remain invested;
when you may need to access it;
your capacity for loss and attitude towards investment risk;
the other assets, savings and sources of income available to you;
your financial objectives; and
how comfortable you are with fluctuations in the value of your investments.
For somebody with decades until they expect to draw from their investments, short-term market movements may have a very different significance than they would for somebody approaching retirement and preparing to take an income from their portfolio.
There is no single investment strategy that is appropriate for everybody.
This is why investment decisions should be considered in the context of your wider financial circumstances, objectives and tolerance for risk rather than simply in response to the latest market headline.
Diversification matters because we don't know what comes next
Looking backwards, it can sometimes appear obvious which investments were the winners.
Looking forwards is considerably harder.
Consistently predicting which companies, sectors, countries or asset classes will perform best next is extremely difficult. Even widely held expectations can be overtaken by unexpected economic, political or global events.
Diversification is one way of recognising that uncertainty.
By spreading investments across different companies, sectors, geographical regions and types of assets, a portfolio doesn't depend entirely on one particular area continuing to perform well.
Diversification cannot remove investment risk and does not prevent a portfolio from falling in value. Different investments can also fall at the same time, particularly during periods of widespread market stress.
What diversification can do is reduce reliance on the performance of any single investment, market or asset class and help ensure that a portfolio remains aligned with the level and type of risk an investor has agreed to take.
Doing nothing isn't the same as ignoring your investments
Taking a long-term approach doesn't mean establishing an investment portfolio and simply forgetting about it.
Your circumstances change. Your objectives may change. The amount of investment risk that is appropriate for you may change too, particularly as you move closer to needing the money.
Portfolios themselves can also change over time as different investments perform at different rates.
Regular reviews therefore remain important.
The distinction is between making considered changes because your circumstances or financial plan require them and making reactive changes simply because markets have moved.
Those are two very different things.
There may be perfectly valid reasons to change an investment strategy. Your objectives could have changed, your time horizon may have shortened, your financial circumstances could be different or the level of risk within your portfolio may no longer be appropriate.
The important question is why the change is being made.
A financial plan can provide context when markets feel uncertain
One of the benefits of having a financial plan is that individual market movements can be considered as part of a much longer journey.
Instead of asking:
"What should I do because markets have fallen?"
it can be more useful to ask:
"Has anything happened that means my long-term financial plan needs to change?"
Sometimes the answer will be yes.
But market volatility itself doesn't necessarily change your objectives, the reason you invested or the timeframe over which your investments were intended to work.
When markets are noisy, having a clear understanding of what your investments are designed to achieve, how much risk you are comfortable taking and how they fit within your wider financial plan can help put short-term events into perspective.
It won't make markets predictable.
It can, however, help to ensure that decisions about your money continue to be driven by your circumstances and long-term objectives rather than by the latest headline.
Talk to us about your investment strategy
At Douglas Steers & Company, investment management forms part of a wider financial planning process. We consider your objectives, circumstances, attitude to risk and capacity for loss when recommending an investment strategy that we believe is appropriate for you.
If you'd like to understand whether your current investments remain aligned with what you're working towards, you can arrange an initial conversation with our team.
Investment risk
Investments can fall as well as rise in value and you may not get back the amount originally invested. Past performance is not a reliable indicator of future results.
This article is for general information only and does not constitute personal financial advice. The suitability of any investment or investment strategy will depend on your individual circumstances, objectives and attitude to risk.
Sources and further reading
Bank of England, Monetary Policy Report – July 2026, published 30 July 2026.
Bank of England, Monetary Policy Summary and Minutes – July 2026, published 30 July 2026.
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