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The art of writing an entertaining and engaging composition is often mired in the difficulty of crafting an interesting subject matter; however, in extraordinary times such as these, it's less about provoking thought and more about trying to capture a fleeting one. The news cycle, moving at a blistering pace to keep up, can't quite comprehend that trillions can now be moved in and out of world markets by outbursts of 280 characters or less. Are we living through a whipsaw economy? Have our hopes and dreams been anchored to the fates of seven overpriced technology stocks in a seven-stock market controlling a third of one of the major indices? Is it too late to unravel 100 years of rapid post-war globalisation when we are addicted to the spoils of the global low-cost supply chain? In the words of the menacing warning about stepping back from overindulgence once penned by The Eagles, "You can check out any time you like, but you can never leave"...

Thank you for allowing us the indulgence of flavouring the start of this blog with some of the more unfettered media narratives; however, what we don't want to do this week is to attempt to give an opinion on tariffs and capital markets, what may happen, or what may not, you have the news for that. What we will try and talk about is the emotional consequence of what happened and how diversified portfolios don't guarantee protection from global instability, but they certainly help to neutralise some of the behavioural effects that markets can inflict on all of us when attempting to make sensible decisions. We feel our asset class diversifies portfolios due to a lack of an immediate correlation with high market volatility, so we aren't professing ourselves as an alternative to economic disaster; we are suggesting it's better to have various tools in your armoury when and if disaster strikes.

The flattened close of the market on the 7th of April did not do justice to the intraday swing, with the S&P500 closing at a modest -0.2%, at the point of writing 24 hours later, futures data and a strong close for Asia coupled with a strong start for the FTSE100 it has all of the scent of a bounce at least for now. However, disguised in this was an 8.5% swing, fuelled by a veritable Hokey Cokey of tariff talk, with some components of the media believing a row back or negotiation with China was coming; we saw the power of those 280 characters as a few words created a 1000 point reversal in the Dow, forcing the President himself to make an opposing comment to reinforce the fact that nothing had even changed. Morgan Stanley is warning investors that they should potentially brace for another 7%-8% drop in the S&P, which could ramp up political pressure on central banks to cut rates quicker, but how receptive non-partisan institutions will be to the 280 characters treatment we are yet to see.

Market volatility amplifies psychological swings even in professionals; emotional regulation, a long-term perspective, and a rules-based strategy are excellent, but in the words of the great Mike Tyson, "everyone has a plan until they get punched in the face." At the point of the metaphorical blow landing, a flight to cash begins, and markets move; stops are run, leveraged positions fail, and margins are called; it becomes less about strategy and more about base emotions and fear; so, as an investor, if you are not positioned to profit from these emotions, what can you do?

Diversification is a fundamental principle in building a strong investment portfolio. It involves spreading investments across various assets to reduce exposure to any single risk. The core idea is simple: don't put all your eggs in one basket. By holding a mix of assets that don't move in perfect correlation, investors can reduce the impact of poor performance in one area. It also helps manage psychological stress. A well-diversified portfolio is less likely to experience extreme fluctuations, making it easier to stay disciplined during periods of uncertainty like this.

Importantly, diversification doesn't guarantee profits or eliminate risk entirely—it simply manages it more effectively. The goal is to optimise the risk-return trade-off, aiming for steady growth rather than chasing high-risk, high-reward bets. For both individual and institutional investors, diversification is a key strategy for pursuing long-term financial goals while maintaining resilience in the face of changing market conditions.

The French would say, "Tout ce qui monte redescend", or simply, "What goes up must come back down", but that could also be true of "what goes down - will go back up over time". Still, if you have set goals, sensible diversification can give you more control over what that period looks like.

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