When stock markets get shaken, it can pay for investors to be patient

Market Turbulence: Experts Advise Patience for Retirement Investors Amid Global Tensions

Market volatility has reached fever pitch in recent weeks, leaving many retirement investors questioning whether they should take action to protect their savings. However, financial experts continue to recommend a steady approach despite the dramatic swings triggered by geopolitical tensions.

The U.S. stock market has historically recovered from every significant downturn it has faced. Whether confronting global financial crises, trade disputes, or military conflicts, the S&P 500 has consistently rebounded to reach new heights. While these recoveries can take years to materialize, investors who abandoned stocks during downturns often missed the subsequent recovery and growth opportunities.

“Although volatility may feel uncomfortable, could rise from here, and possibly cause a near-term drawdown in stocks, volatility in itself tends to be brief when it reaches more extreme levels,” notes Anthony Saglimbene, chief market strategist at Ameriprise. “And, more often than not, the extreme volatility provides investors with a solid long-term entry point to buy stocks rather than sell.”

The ongoing conflict in Iran represents the latest challenge to market stability. Fighting has disrupted shipping through the Strait of Hormuz, a critical waterway that normally handles about 20% of global oil transport daily. With regional storage facilities reaching capacity and nowhere for crude to go, producers have announced output reductions.

Oil prices briefly spiked to nearly $120 per barrel on Monday—the highest level since mid-2022—amid concerns that production disruptions could persist. Some analysts project prices could reach $150 if the strait remains closed for an extended period. Prolonged high oil prices risk pushing the global economy toward “stagflation,” a problematic combination of stagnant growth and high inflation that presents central banks with limited effective response options.

Despite these concerns, the S&P 500 remains only 4.4% below its January all-time high. The market’s volatility, however, creates the perception of greater losses. Since the Iran conflict began, the Dow Jones Industrial Average has experienced multiple sessions where morning losses of approximately 900 points were substantially or completely erased by the day’s end.

Market corrections—declines of 10% or more—occur roughly annually and are viewed by professionals as healthy adjustments that prevent excessive optimism from driving prices to unsustainable levels. This historical context is important for investors considering dramatic portfolio changes.

While moving retirement investments from stocks to bonds might reduce volatility exposure, it creates the challenge of determining when to reinvest in equities. Market timing is notoriously difficult, and some of the strongest market rallies have occurred amid downturns. Financial advisors typically recommend keeping money in stocks only if you won’t need access to those funds for several years, ideally a decade or longer.

The democratization of investing through smartphone apps has introduced many first-time investors to market volatility. However, younger investors benefit from longer time horizons, allowing their portfolios to recover and potentially grow substantially before retirement. For this demographic, market downturns can represent buying opportunities.

Near-retirees face greater challenges with less recovery time available. Those already retired might consider reducing withdrawals during significant downturns to preserve future growth potential. Even in retirement, investments may need to last 30 years or more, requiring some continued equity exposure.

Emergency withdrawals from retirement accounts carry substantial penalties and tax implications while eliminating any chance for those investments to recover. Loans against 401(k) accounts may be possible but come with their own complications and potential penalties.

This market environment differs from previous downturns in some respects. Typically, Treasury bonds and gold prices rise during stock market declines as investors seek safer assets. Currently, Treasury prices have been pressured by inflation concerns, while gold has periodically struggled when Treasury yields have climbed, as non-yielding assets become less attractive when bonds pay higher interest.

The duration of current market volatility remains unknown. For most retirement investors with adequate time horizons, financial professionals continue to advocate patience and a long-term perspective rather than reactive changes during periods of uncertainty.