Six strategies for volatile markets

Six strategies for volatile markets

 

Source: VIX index, as of 5/5/26¹

Since the initiation of a joint Israeli-US bombing campaign on 28th February, the Strait of Hormuz shipping lanes where roughly 20% of the world’s oil and liquefied natural gas (LNG) transits² have been de facto closed, raising concerns amongst investors that energy supply shortages and higher prices will stoke inflation and stunt growth across global economies. 

This led to stock market falls in March. Yet, in April came a rebound, with stocks rising to record highs as investors latched onto a tentative ceasefire announcement and the belief a permanent resolution would eventually be found. 

For some observers, the market’s remarkable resilience appears almost Panglossian. They argue the AI tech boom may be too tantalising for investor enthusiasm to be quashed over what’s expected to be a flash-in-the-pan conflict.  

Others wonder if investors have become conditioned by the perception of TACO (Trump Always Chickens Out) – the President’s tendency to de-escalate the geopolitical shocks he’s created when the economic pain becomes too much to bear. They point to the “Liberation Day” tariffs of April 2025 as a good example, during which Trump skewered stocks following announcements that trading partners would be hit with a host of global tariffs, only for him to row back on them days later amid a market tailspin. 

Regardless, as investors we must focus on the risks in front of us. With a blockade of the Strait ongoing, tensions between Iran and the US / Israel remaining elevated as both sides struggle to find a ‘win’, damage to oil infrastructure that may be tricky to fix, and rising prices, volatility may spike again soon.  

Here, we take a look at some investor strategies for volatile times. 

1. Make sure your asset mix is suited to your financial goals and temperament 

While equities may be a fantastic tool for building long-term wealth, the recent market volatility vividly reminds us that these investments are inherently risky. If you’re the sort of investor made anxious by stock market falls, you may be able to temper these risks by introducing less volatile asset classes into a portfolio such bonds and cash – in effect, cranking down the overall risk profile.  

An over-allocation to equities can also be too risky if your financial goals are in the not-too distant future. Given the likely volatility, experts point to investments in shares needing a minimum of at least 5 years to reduce the chances of a loss, although of course this is not guaranteed³. 

2. Consider active stock picking  

The Iran crisis has pointed to the importance of macroeconomics and geopolitics on investment returns in the Trump era. Inflation, interest rates and trade policy are arguably more unpredictable than they have been in the past. In particular, the Trump administration’s departure from free trade has created uncertainties for businesses: disrupting supply chains and driving up costs.  

These sorts of top-down risks can bear down on underlying company fundamentals, especially during shocks, potentially putting margins under pressure in unexpected ways. In this environment, experienced stock pickers in active strategies are able to consider the ever-evolving landscape of risks and opportunities and shift portfolios accordingly. 
 

3. Use monthly investing to manage volatility 

It can be nerve-wracking investing large sums of money in the stock market, especially when they’re volatile and you may be concerned over the possibility of immediate loses. One way to calm these nerves is to drip-feed cash into the market, for example on a monthly basis, which investing platforms make easy and cost effective.  
 

4. Don’t let emotion get in the way of good investment decisions

Emotions often creep into investment decision-making - we are human after all. Unfortunately, it can lead to poor investment outcomes.   

Common behaviours include jumping on trends without considering the fundamentals of an investment, becoming over-confident following big investment gains, using past performance to form opinions about how investments might perform in the future - and most saliently to the volatility we’re seeing today - panic selling during down-markets, which may crystallise loses. 

What’s most important is remaining rational and dispassionate about the stock markets, remembering that history is littered with tempests in teapots that began as earth-shattering events.  

 

5. Be an ‘early bird’ investor in the new tax year

Each tax year brings with it an annual ISA allowance of £20,000. Although the current market drama might be a bit off-putting, taking advantage of the fresh allowance and investing early in the new tax year rather than dithering until its end is likely to benefit your long-term returns, according to figures from AJ Bell (see below).  

They found that someone who invested £5,000 at the beginning of every tax year since 1999 in a global equity fund similar to Alliance Witan would today be around £25k better off in comparison to someone who waited until the end of the tax year (see chart below). 

The tax benefits of the wrapper are not to be sniffed at either, especially given that on April 6th this year dividend tax rates rose 2 percentage points to 10.75% for basic-rate taxpayers and 35.75% for higher rate taxpayers⁴. If you have assets sitting outside of an ISA, investing platforms make transfers into one easy via their bed-an-ISA processes.  

6. Keep your portfolio properly diversified across markets and styles 

Markets are never static animals. What once may have started out as a nicely balanced portfolio can become contorted over time as individual markets or styles fall in and out of favour. What’s more, switches in market direction can be particularly sudden following geopolitical shocks, such as we have seen with the Iran crisis. During these times, you may find it useful having an investment manager - such as Alliance Witan’s manager Willis Towers Watson (WTW) - ensuring your portfolio remains balanced and well diversified, spreading the risks and keeping you on track to your financial goals. 

¹https://www.google.com/finance/quote/VIX:INDEXCBOE?sa=X&ved=2ahUKEwjlz56M06GUAxVfZ0EAHbPCOHEQ3ecFKAN6BAghEAQ&window=6M (accessed 7 May 2026).

² https://www.bbc.co.uk/news/articles/c79jqx1xdy9o (accessed 7 May 2026).

^{3 https://www.fca.org.uk/investsmart/golden-rules-investing (accessed 7 May 2026).}

^{4 https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-dividend-income/changes-to-tax-rates-for-property-savings-dividend-income (accessed 7 May 2026).}

This is a financial promotion that has been approved for issue to UK Retail Clients, by Towers Watson Investment Management Limited (TWIM), authorised and regulated by the Financial Conduct Authority, (FRN 446740). Please refer to the KID and any other relevant documentation before making any final investment decisions.  TWIM is the Alternative Investment Fund Manager (AIFM) for Alliance Witan PLC. TWIM is part of Willis Towers Watson. 

Alliance Witan PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office, River Court, 5 West Victoria Dock Road, Dundee DD1 3JT. Alliance Witan PLC gives no financial or investment advice. © Copyright Alliance Witan PLC. Tel: 01382 938320. 

This information is for informational purposes only and should not be considered investment advice. The views expressed are the opinion of TWIM and are not intended as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell any securities. The views expressed were current as of 7 May 2026 and are subject to change.  

Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. You should not assume that any investment is or will be profitable. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Information contained herein has been obtained from sources believed to be reliable but not guaranteed.