Headline Roulette Is a Game: Equity Investing Is Not

Don’t play headline roulette. Those headlines have been whiplashing us back and forth between positive and negative sentiment. While it’s impossible to ignore these headlines, it’s important for a long-term investor to really think about what matters.

What really matters is understanding, well, where are the sources of underlying company growth? It’s never a good idea to sell at a moment when your emotions are high and you’re panicking. If you sold in April, you would’ve missed out on a 20% rally since that time. We started off the year with this consensus view of US exceptionalism. Nothing was going to stop the US equity market. It was the land for technology. It was going to be protected from any tariff announcement, and the markets were just going to go up. Small-caps were on a tear. You come to today, and now the question is, is US exceptionalism dead? And that was really driven by just some weakness in the dollar and international equity markets outperforming the US equity markets.

While we shouldn’t be driven by conventional wisdom, we need to engage with it. The headlines do tell us about important risks that we need to focus on. Recently, the escalation of risks in the Middle East reminds us how important geopolitical risks can be. The real challenge that investors face in terms of their overall wealth creation is the fact that growth is getting scarce. You’ve got inflation and you’ve got a concentration in the equity markets. So in order to invest for the long term, you need to think about what are the longer-term opportunities I have. You have a massive revolution in productivity that could happen because of AI. There are many beneficiaries that haven’t shown up yet. You’ve got an energy transformation that still needs to happen to power that AI. And finally, with deglobalization, we need to reinvest in our supply chain and our manufacturing onshore. There’s so many investment opportunities that can happen over the long term that investors can profit from.

Have a disciplined strategy, stick to it. We need to find companies with the strategy to win, whether that’s looking across competitive moats, or if your question is on US exceptionalism. There’s plenty of US companies with the right to win. However, you also have to think about Europe, Japan [and] emerging markets. There are also plenty of companies out there that can generate very high returns. And as a matter of fact, you can use deglobalization as your ally by reducing volatility.

And finally, defensive equity strategies [are] so important in this environment. Companies with stable earnings streams, thinking about the ups and downs and how that can affect your portfolio is a really important part of your long-term strategy. If investors just keep following headlines, they won’t be able to access these critical areas of growth that will generate return opportunities for the future.