As we move through 2026, global headlines feel more dramatic than ever. Geopolitical volatility, shifting economic policies, and heightened market sensitivity have created what many institutions describe as a turbulent, stormy, and hyper-reactive environment. Yet, despite all this unrest, history – and behavioural finance – shows that investors who remain disciplined tend to fare best.
Navigating global uncertainty requires discipline, evidence-based thinking, and a commitment to long-term investment principles.
Let’s unpack the current global backdrop and why maintaining a long-term perspective has never been more important.
2026 Global Backdrop
Markets are facing an elevated geopolitical environment, contributing to heightened market sensitivity. Early 2026 has seen intensifying flashpoints:
- Venezuela: The US removal of President Nicolás Maduro has elevated regional tensions and security risks, increasing the likelihood of further military actions and reshaping oil-related geopolitical relationships.
- Iran: Continued protests and heavy government crackdowns are raising instability and the risk of conflict escalation.
- US–Greenland tensions: Strategic interest in Greenland has surged, causing friction within NATO and raising broader geopolitical concerns.
Markets Are Reacting – But Not Always Rationally
Despite significant geopolitical headlines, early‑2026 markets have been surprisingly steady. Allianz Research notes that global equities and rates have risen 7% to 8% year‑to‑date, even as investors express increasing uneasiness.
At the same time:
- One‑day volatility indices (VIX1D) have shown sharp spikes during key geopolitical announcements – even when the broader VIX remains calm. This indicates markets are becoming more reactive to news events.
- Energy markets remain sensitive, especially as tensions in the Middle East threaten key supply routes like the Strait of Hormuz, which carries 25% of the world’s seaborne oil.
- Global GDP forecasts for 2026 hover around 2.7%–2.9%, reflecting a world still growing yet increasingly fragile amid trade tensions and policy uncertainty.
In short: Markets are balancing optimism with an elevated risk premium – a classic setup for volatility.
Why Staying Invested Matters Most During Unrest
Periods of heightened uncertainty amplify behavioural biases that can derail investor outcomes. Research across behavioural finance provides consistent evidence:
Loss Aversion & Panic Selling – Humans feel losses twice as intensely as equivalent gains, making us more likely to sell during downturns even when long-term fundamentals remain intact. Studies show this behaviour contributes to market volatility.
Herding & Following Headlines – Investors often mimic the behaviour of others during stress, magnifying volatility. Herding influences both rallies and sell-offs – and usually leads to buying high and selling low.
Recency Bias – We overweigh recent events, believing current turmoil will last indefinitely. Research from Morningstar highlights how stressful periods push investors to rely on fast, shortcut-driven thinking, increasing susceptibility to emotional decisions.
Long-term Outcomes Reward Patience – Across multiple studies and historical market cycles, investors who remain invested through volatility generally achieve substantially higher returns than those who try to time the market.
1973 Oil Crisis: Sharp supply shocks led to significant volatility, yet diversified long-term portfolios recovered strongly.
1990 Gulf War: Markets fell abruptly but recovered within months as uncertainty cleared.
Even missing just a handful of the market’s best days can reduce long-term wealth.
What This Means for Investors Today
Despite the noise, several key themes support staying the course:
- Markets often recover ahead of news flow. Once uncertainty begins to clear, markets usually rebound quickly – and unpredictably.
- Volatility is normal, not new. Even in years with strong returns, markets experience multiple pullbacks.
- Geopolitical shocks rarely derail long-term market performance. Historically, markets absorb geopolitical turmoil faster than most investors expect.
More importantly, your investment strategy is designed with volatility in mind. It anticipates events like those we’re seeing today.
Final Thoughts: Stay in Your Seat
The world is undoubtedly complex right now – but reacting emotionally to short-term turbulence has never been a successful investment strategy. In fact, the very moments that feel most uncomfortable often sow the seeds of future long-term returns.
If you have any concerns, please reach out and speak with your adviser.
References:
World Economic Forum Global Risks Report 2026.
S&P Global Geopolitical Risk Brief January 2026.
Allianz Research Geopolitical Outlook 2026.
Financial Content Market Minute January 2026 analysis.
UNCTAD World Economic Situation and Prospects 2026.
Journal of Informatics Education & Research (2024) on Behavioural Finance.
Katrina Dhu (CFP® Professional, MFinPlan, ABFP®, CRPC®, GradDipFinPlan, ADFS(FP), DFS(FP)) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Performance data shown represents past performance or simulated performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
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