This summer was a quiet one for the markets after a rollercoaster ride earlier this year. With this lull in excitement, it feels like a good time to reflect on investment lessons learned. Yet, as I write these words, it occurs to me that investment lessons are rarely learned, it would be more accurate to say that they are remembered. The most successful investors of the last century, such as Benjamin Graham, John Bogle, and Warren Buffett, have generously shared these lessons over and over again. Mantras such as "buy low, sell high" and "stay the course" are easy to learn but hard to remember. That's because during times of fear, memory fails us. When our brains don't agree with our spine, the spine usually wins.

Like most animals, we humans are really good at detecting and reacting to danger. When we encounter a threat, our pupils dilate, our heart speeds up, and adrenaline pumps through our veins. In those moments, our instincts know exactly what to do: fight or flee. Many investors know this feeling, especially during times of market turbulence such as the Global Financial Crisis, Brexit, and the pandemic.

Earlier this year, many folks had a similar reaction to the trade war announced by the White House. Their immediate reaction was worry about job losses, inflation, and recession. Yet six months later, those things have yet to materialize (although they still might).

As we can see from the attached chart, April was the peak moment of fear for the market. Stocks dropped 20%. Yet judging by the furious recovery, reacting in that moment would have been a big mistake.

In June, we chatted with many Longwave clients about how they handled this most recent adrenaline-inducing rollercoaster ride. One client's approach was most memorable: "When the market goes crazy, I go to sleep," they said. This was, of course, music to our ears.

"When the markets go crazy..."

The dictionary defines 'crazy' as having one's thoughts, emotions, and behaviors significantly impaired. Just as an individual can go crazy, investors can go crazy collectively, like a herd of gazelle reacting to a nearby lioness. Most investors know and have seen that markets rise over time, so why panic? Sometimes we just do what others are doing, or what the scary headlines imply we should do.

Herds are communities that depend on one another. Once a gazelle sees one of their herd mates running, they don't need to see the danger for themselves; they take off in unison, and in the same direction.

Good investors try to avoid the herd mentality. What may be right for day-traders and the media is usually not the right thing for individual investors.

"...I go to sleep."

Being constantly plugged in through our cell phones, cable news channels, social media, and investment apps means it's easy to get overwhelmed by a constant barrage of negative information. Your body senses danger and wants to flee. What's more, it's been shown that intense emotions make it difficult to think or act rationally. Yet, the best investors have historically just gone to sleep during turbulent times.

According to mental health experts, the next time you are trying to go to sleep, start by taking control of your "information diet" to counter the barrage of bad news flooding in:

Limit exposure: Set intentional time limits for checking the news and avoid "doomscrolling".
Vary your sources: Diversify your news intake to include solution-focused or positive journalism, which highlights constructive responses to challenges.
Practice mindfulness: Pay attention to your feelings as you consume news, and use deep breathing or meditation to calm yourself if you feel overwhelmed.
Take action: Channel your concern into purposeful action, such as volunteering or supporting a cause. This can help you regain a sense of agency and purpose.
Prioritize self-care: Engage in activities that bring you joy and help you relax, such as hobbies, exercise, or spending time in nature.
Unplug: Take periodic digital detox breaks to reset your mental state and restore perspective.

Lessons Remembered

Although the tariff swoon was a relatively short episode, it was another 'lesson remembered' from Investing 101. Rarely do we see fundamental market principles that we discuss regularly demonstrated so clearly over such a compact time period.

During this time, in addition to the "go to sleep" mantra, another foundational investing approach proved its worth. When the market swooned and recession odds soared, diversification helped steady the ship. From January through April, bonds gained just over 3%[i] and developed overseas stocks rose over 11%[ii] offsetting much of the losses in US stocks. Indeed, some investors that didn’t go to sleep may have looked at their investments and were surprised they were down less than they thought. Then, as the economic picture became clearer, the S&P 500 experienced one of its fastest bounce-backs in history.

Your Longwave portfolio extends well beyond large US companies, encompassing a carefully diversified mix of bonds, international stocks, real estate, and mid- to small-cap companies. As with previous market cycles, we employ this diversification strategy to help limit volatility during periods of uncertainty.

Expectations Going Forward

When the tariffs were initially announced, they created a lot of panic. Yet the story of 2025 so far has been one of resilience, with employment, inflation, consumer spending, and corporate profits holding up so far. But the impact of tariffs tends to lag. It takes a while for employers and consumers to adjust to new, higher costs. Many of the tariffs were implemented in the summer and so are only now starting to have an effect and be counted. A slowdown is not out of the question. For the rest of the year, we will be carefully following the data to see what happens.

On the other hand, our economy has again and again shown its strength and flexibility. Overseas markets have also been a bright spot this year. It's notable that there is $7 trillion of 'dry powder' sitting around in Money Market funds [iii]. Economically speaking, we are not out of the woods, but nor are we lost.

Of course, we are also confident that our approach to portfolio construction and market discipline will serve us well despite any possible ups and downs.

Conclusion

For many of us, the summer was a time to relax and slow down the pace of life. For others, it may have been hard to truly get a good night's rest given the turbulent political environment.

We do not suggest going to sleep about everything—certainly not the environment or social justice issues. History suggests, however, that we would do well to think a little less about markets and the economy. As the fall holidays now approach, Longwave continues to stay alert and diversified so you can focus on things your savings are meant to provide in the first place: time with family, hobbies, and health.

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.

All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.