There are two main reasons for this:
1. The fog of war is very real. Even in a perfectly executed attack, depending on your vantage point, it is very hard to tell what is happening at all. Combat is deafening, confusing, and extremely chaotic. You are pumping full of adrenaline. You lose sense of time and fine motor coordination deteriorates. The first person to get on the radio and report the details to their superior will not have time to get it completely right. But they must report immediately, so others may react to the situation as it develops. In training and combat, being able to “paint the picture” for your higher headquarters while transmitting over a radio in the middle of a fight is as much art as it is science.
2. The flow of communication. Communication flow in radio reports often resembles a game of telephone. As information passes through multiple people and channels, it transforms. Small nuances are added or lost, and gaps are filled with conjectures and speculation. This happens because higher-ranking commanders seek certainty and demand answers. However, the best commanders, especially in elite units, are comfortable embracing uncertainty.
In combat, tactical patience—waiting for a situation to unfold before acting decisively—can be critical. Rushing decisions amid chaos often creates or worsens problems, especially without prior planning. This patience might last seconds or days, depending on the context. Similarly, we should approach breaking news with the same restraint, allowing time to assess its significance before reacting.
Amid the deluge of tariff headlines, minute-by-minute trade updates, and reports of civil unrest, a veil of uncertainty always clouds the news. The chances of breaking stories offering clear, actionable insights for portfolio adjustments are slim. These decisions and their resulting headlines are complex. Yet, pundits often reduce these intricate events to linear, simplistic narratives, as if a new tariff regime were as straightforward as a physics equation. Physics Nobel laureate Richard Feynman is famously quoted as saying, “Imagine how much harder physics would be if electrons had feelings!” This illustrates the simplicity and predictability of basic physical laws compared to the complexities of human behavior, emotions, and decision-making in complex systems.
So, what do we do to confront the fog and uncertainty?
We encourage you to revisit your risk tolerance. Like I’ve written about previously, to assess our own risk tolerances, we must consider our willingness, ability, and need for risk.
Willingness is all about a gut feeling of comfort. It is a non-quantitative concept. A common test for willingness to take risk is the “sleep at night test.” If you can’t sleep at night because of an investment decision, then you may have exceeded (or are considering exceeding) your willingness to take risk. J.P. Morgan once had a friend who was so worried about his stock holdings that he could not sleep at night. The friend asked, “What should I do about my stocks?” Morgan replied, “Sell down to your sleeping point.” (Burton G. Malkiel, A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing) Conversely, if your decisions do not cause you unrest, your investments are probably aligned with your willingness for risk. Thus, willingness to take risk reflects your level of comfort with possible loss.
While your willingness for risk may come from an innate feel in your gut, your ability to take risk is quantifiable. It is based on your financial plan or budget. To be able to take on risk you must have something you can afford to place at risk. Thus, your ability for risk is your investable surplus above and beyond what I’ll call your operating cash flow. In other words, how much can you afford to lose while still maintaining your standard of living or saving towards a future goal? If you need every single dollar within your portfolio to sustain your lifestyle as you move deeper and deeper into retirement, you may want to consider recalibrating the portfolio for principal protection instead of growth as an example.
Finally, similar to ability, your need for risk is quantifiable.
This is the amount of risk that the investor needs to accept to reach his or her financial goals. The rate of return necessary to reach these goals can be estimated by examining time frames and income requirements. Then, the rate of return information can be used to help the investor decide upon the types of investments to engage in and the level of risk to take on.
To potentially reap the benefits of returns in the market, we must be comfortable operating with some level of uncertainty even though as humans we crave certainty at all times. While the headlines will continue to incite fear (rage = engagement and fear sells), trust your allocation and the ability of the American company and consumer to thrive over longer time horizons. Exhibit some tactical patience, let the situation develop, and periodically evaluate your own risk tolerance.
Disclosures: This material is for informational and educational purposes only and should not be construed as investment, legal, or tax advice. The views expressed are those of the author as of the date of publication and are subject to change without notice. Any references to market performance or economic conditions are historical and do not guarantee future results. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. All examples provided are hypothetical and for illustrative purposes only. Individual investor situations vary, and investment decisions should be made based on each investor’s specific financial situation, goals, and risk tolerance. Before implementing any strategy, please consult with a qualified financial professional to determine its suitability for your individual circumstances. Howe & Rusling is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training.
