Are Nervous Markets Good For Long-Term Investors?

March 30, 2026

"Should I be worried?" I’ve gotten this question a few times over the past couple of weeks.

That's not because the people I work with don't have confidence in the plan we've designed. It's just that sudden downturns and unpredictability like this cause us all to start asking questions.

But what the market is doing right now might be less of a warning sign than it seems. In fact, if you understand what's going on beneath the surface, this moment starts to look like it could be a necessary phase of a healthy market cycle, rather than the beginning of something dangerous.

Bear with me.

Why are markets reacting differently to the same news?

When the war with Iran first began, markets were behaving in a familiar way.

Any headline suggesting a possible pause in hostilities or a hint of diplomatic progress triggered a relief rally. On March 16, as oil prices showed early signs of stabilizing, the S&P 500 climbed by over 1%, its strongest session in five weeks. Markets were telling themselves a simple story: this won't last long.

Then came Monday, March 23. President Trump posted on Truth Social that the U.S. and Iran had held "very good and productive conversations" toward a "complete and total resolution."

That morning, the Dow surged more than 1,000 points, the S&P 500 exploded by more than 2%, and the price of oil dropped by more than 12%. Trump’s post was music to the market’s ears.

However, by the time most people read the news over their morning coffee, Iran had denied that any talks had taken place at all, and these initial moves had started to reverse course.

Then came March 26. Trump made yet another Truth Social post that talks with Iran were going well and the US was extending the timeline for potential strikes. However, this time the reaction was very different. Oil prices resumed their climb, and the S&P 500 fell 1.74%, its worst single day since the war began.

In a matter of weeks, the market has seen a meaningful shift in sentiment. The same kind of optimistic headline that once sparked a big rally barely moved the needle anymore.

Markets stopped buying the rhetoric. They started waiting for the evidence.

That shift has a name. It's called skepticism. And it matters more than most investors realize.

Is market skepticism a warning sign or a healthy phase?

I've been in this business long enough to see many people misunderstand the famous quote by legendary investor, John Templeton. They focus on the last part while ignoring what comes before it. But what comes before is just as important:

"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria."

Although I don’t think he was referring to investing, Jerry Garcia had it right when he sang, “when life feels like easy street, there is danger at your door.” And this is precisely why a healthy dose of skepticism is so important, because it's where the foundation for the next bull run gets built.

When investors are skeptical, expectations stay reasonable, risks get discussed openly instead of quietly ignored, and capital gets allocated more carefully. Contrast that with euphoria, where valuations stretch beyond what fundamentals support, narratives start doing the job that numbers should be doing, and risk gets waved away with a story.

From that perspective, the nervousness you're seeing in the market right now may be doing something really valuable: resetting expectations before they become dangerously high, particularly in areas of the market that had started pricing in a very optimistic future.

Can anyone predict what markets do next?

I want to be honest here: I can't tell you what happens next. Nobody can.

The short-term risk is real. Oil prices have risen sharply since the conflict began, and the Strait of Hormuz, through which the U.S. Energy Information Administration estimates roughly 20% of global oil supply passes, remains the central point of vulnerability.

If that disruption persists, the downstream effects on transportation costs, business margins, and consumer purchasing power could get worse before they get better.

There's also risk that the market may still be underpricing a longer conflict or a broader regional spillover. Both would compound the pressure on oil markets and global growth.

I say this not to pile on to the anxiety, but because honest risk assessment is part of how a great investor stays disciplined. Your investment strategy and financial plan must be built to account for uncertainty.

Do oil prices cause the kind of inflation the Fed can fix?

Here's something that’s not getting discussed nearly enough right now: when oil prices rise because a key shipping route is disrupted, that's a fundamentally different problem than inflation caused by too much consumer demand or too much money in the system.

The Federal Reserve's primary tool is raising interest rates. That's effective against demand-driven inflation. It does nothing to reopen the Strait of Hormuz. It doesn't resolve a geopolitical standoff. It can't increase oil production on its own.

That has significant implications. If inflation in other parts of the economy continues the cooling pattern we've seen over the past two years, for instance, the Fed may eventually find itself in a position where supporting economic growth (via lower rates) takes precedence over fighting supply-side inflation.

Historically, periods of monetary easing (lower rates) have tended to produce strong market recoveries, often well before the underlying economy has fully stabilized. That's not a prediction. It’s just worth keeping in mind, especially right now.

What should long-term investors do during market volatility?

The markets have been through this before.

During the Cuban Missile Crisis in 1962, as the U.S. and Soviet Union stood at the brink of nuclear conflict, the S&P 500 fell about 7%. Once the crisis de-escalated, those losses were recovered in just over two weeks.

After Iraq invaded Kuwait in 1990, the S&P 500 fell roughly 16%, then recovered fully and finished the year up nearly 27%. The long-term impact of geopolitical events on markets has historically been smaller than their short-term emotional impact on investors.

It’s important to remember that markets are always looking forward, and so should long-term investors like you. Often, when things look and feel the worst, an unseen catalyst is waiting on the horizon.

While nobody knows what that may look like today, a couple things are worth considering. The obvious one is a resolution to the war, which would allow the economy and markets to move on. But let’s say the war does carry on longer than anticipated, causing oil prices to stay elevated and increasing the risk of recession.

With all the headlines about the Strait of Hormuz, it’s easy to forget that the U.S. is the largest oil producer in the world. And our shale companies can ramp up production far faster than in previous energy cycles. Sustained high oil prices are a powerful incentive for them to do exactly that.

Given rising energy demand, both from traditional sources and new ones (like powering AI infrastructure), this could be a longer-term tailwind for the U.S. economy. And it could also help us avoid the type of 1970’s energy crisis that so many investors fear right now.

This doesn’t change the fact that the emotional impact of short-term events is very real. And it's important to acknowledge that.

Whether you're a few years from retirement or just a few years into building toward it, the framework’s the same: know what you own and why, make sure you have enough liquidity so that a rough stretch doesn't force you to sell at the wrong time, and keep the long view in mind.

Remember that volatility isn't a flaw in the system. It's a feature that's historically provided strong returns to patient investors. Learning to navigate it, rather than react to it, is what ultimately drives better outcomes.