INVESTORS need “to build portfolios that can survive political theatre” and be mindful that trust itself is a “variable” while Trump is in power, one wealth manager has claimed, as it remains unclear to what extent the US and Iran are genuinely in peace negotiations, or whether they even are at all.
Another said “this is not a normal market environment where short-term signals can be relied upon”.
On Monday, in a now notorious post, Donald Trump declared on Truth Social that the US and Iran had been in “very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East”.
On the back of that one post, the oil price immediately fell, while shares rebounded, as hopes of an end to the war fed through into markets almost instantaneously.
But as of Wednesday, the war in the Middle East is raging on with no sign of abating, despite the fact that Donald Trump insists Iran wants a deal “so badly”. At the same time, economies globally continue to brace for an inflationary threat.
Political theatre
Experts said investors are no longer having to deal with investing fundamentals with Trump in the White House but “narrative risk” and ambiguity.
Nouran Moustafa, Practice Principal and independent financial adviser at London-based Roxton Wealth, said: “The scenario we’re in at present makes investing harder, because markets can cope with bad news far better than they can cope with blurred reality.
“The problem is not just volatility, it is credibility. When entire asset classes swing on statements that may be strategic, contradictory or later denied, investors are no longer just pricing fundamentals, they are pricing narrative risk.
“That is a very unstable way for markets to function. It rewards speed over judgment and reaction over discipline.
“The real danger is that trust itself becomes a variable in asset pricing, and once that happens, equities, oil, bonds and currencies can all move violently on noise rather than substance.
“For investors, the answer is not to chase every headline, but to build portfolios that can survive political theatre, because right now ambiguity is behaving like a market force in its own right.”
Sharp moves
Anita Wright, Chartered Financial Planner at Ribble Wealth Management, said political noise and its ability to shift markets rapidly is being accentuated by the fragility of the financial system underpinning it — a backdrop against which discipline is paramount.
She said: “The issue here is not simply political communication. It is the fragility of the financial system being exposed by it. Markets are already operating on unstable foundations of excessive debt, overvalued assets and reliance on continuous liquidity.
“In that environment, it does not take much to trigger sharp moves. Conflicting or unreliable messaging simply acts as a catalyst, not the root cause.
“Markets are no longer anchored by stable fundamentals but are reacting to narratives, policy signals and perceived intervention. This is not a normal market environment where short-term signals can be relied upon.
“It is one where discipline, long-term positioning and an understanding of structural risks matter far more than trying to interpret political noise in real time.”
Control the controllables
Joe Farmer, Independent Financial Adviser at The Retirement Studio, also emphasised the importance of discipline.
He said: “Markets are currently dealing with a real war and, at the same time, a war with reality where the truth of events that are unfolding is continuously being called into question.
“With this in mind, investors need to focus more than ever on controlling the controllables, which is first and foremost having an investment portfolio that is diversified across asset classes, well structured and consistent with your risk appetite.
“The truth will ultimately come out and investors should stick to a long-term investment strategy that will reward it.”
Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, agreed.
He said: “Trump is a wildcard because nobody knows what he’s going to do or say next. The best defence against this is to largely ignore the short-term noise and focus on the long term.”
