Scott Kingsley, Senior Wealth Advisor
When markets fall sharply, the instinct is to act. That instinct is understandable. It is also, in most cases, the single biggest threat to long-term investment returns.
For expats, volatile markets carry added complexity. Managing assets across jurisdictions, monitoring sterling from abroad and navigating tax rules that vary depending on where you live and where your money is held. All of this makes a market downturn feel harder to read and harder to sit with. But the evidence on what investors should actually do during the
Markets don’t move in straight lines. Using US equity market history as a guide, 10% corrections have occurred roughly every two to three years, while 20% bear-market declines have been less frequent. Global markets show the same broad pattern, although the exact frequency depends on the index, currency and period measured.
This isn’t a malfunction; markets overshoot on the way up and reprice on the way down. That cycle of extension and correction is how markets function. The volatility is the mechanism, not a sign that something has broken.
For long-term investors, this matters for a straightforward reason. The returns that markets generate over time are inseparable from the periods of discomfort along the way. Investors who want the long-term gains without the short-term turbulence are, in practice, asking for something markets just don’t offer.
The evidence on market recoveries is more consistent than many investors expect.
After the 2008 global financial crisis, depending on the index and currency used, diversified global equity portfolios broadly recovered over the following several years, with reinvested dividends shortening the recovery period for many investors. The MSCI World Index fell by roughly 34% between February and March 2020 during the COVID-19 crash, and had recovered its February peak by September of that year. The dot-com bust was slower and more damaging, particularly for concentrated technology portfolios. Diversified investors who remained invested recovered, and the decade that followed produced strong returns.
The pattern holds across different time periods and types of market stress: sharp falls are followed by recoveries, and those recoveries tend to reward investors who stayed through the difficult period rather than those who exited and waited for conditions to improve.
One figure worth knowing: J.P. Morgan research has shown that seven of the ten best days in the market occurred within fifteen days of the ten worst days. Investors who exit during a downturn frequently miss the early stages of recovery, which is where a significant portion of long-term gains are concentrated.
For expats, sterling has often come under pressure against safe-haven currencies such as the US dollar during risk-off periods. For investors holding assets in other currencies, that can affect how returns look in pounds. The key point isn’t to assume the portfolio result in sterling tells the whole story.
Behavioural finance describes a pattern called loss aversion: for many investors, losses feel materially more painful than equivalent gains feel rewarding. This is not a character flaw. It’s actually how human psychology is structured, and it’s why market downturns reliably produce the same sequence of events: anxiety, the urge to act, decisions made under pressure and outcomes that just don’t reflect long-term interests.
In practice, this shows up as selling near the bottom of a correction and locking in a loss that would otherwise have recovered. It shows up as waiting on the sidelines for certainty before reinvesting, and completely missing the rebound as a result. It shows up as checking a portfolio daily during volatile periods, which amplifies the psychological impact of short-term price movements without changing the underlying investment reality.
For expats managing money across multiple currencies, there is a further complication. What appears to be a portfolio loss in one currency might look quite different once exchange rate movements are accounted for. A snapshot view of performance during a downturn can be genuinely misleading, and acting on that view tends to produce worse outcomes than stepping back and looking at the full picture.
During volatile periods, the bar for making changes to a portfolio should be higher than it feels. That doesn’t mean doing nothing forever. It means distinguishing between emotionally charged, reactive decisions driven by short-term market movements and carefully planned decisions grounded in long-term objectives.
Expats usually find that a structured review is more useful than a reactive one. A few questions worth asking:
Markets will keep moving as they always have. Some of those moves will be uncomfortable.
Historical market data and behavioural finance research broadly support the same conclusion: diversified investors who avoid reactive decisions during downturns are usually better placed than those who move in and out of markets under pressure.
If recent volatility has made you question your portfolio, the right response is not panic, but a structured review. A short conversation can help clarify whether your investments, tax position, and currency exposure still fit the life you are building abroad.