Stock market numbers are displayed on the floor of the New York Stock Exchange on March 3. Large rises or falls in the values of different assets could be an opportunity for investors to rebalance their portfolios.Michael M. Santiago/Getty Images
The attack on Iran by U.S. and Israeli forces on Feb. 28 had all the makings of a major market crisis. Worries over disruptions to the global oil supply saw the benchmark crude price spike to nearly US$120 a barrel on Monday before plunging again. A flight to cash has even hit traditional safe havens such as gold and U.S. Treasuries, and U.S. stock volatility has reached more than 10-month highs.
Against that backdrop, the American S&P 500 and Canadian S&P/TSX Composite Index stood about 3 to 4 per cent shy of recent record-highs on Wednesday afternoon.
It is a lesson, market experts say, in the effective impossibility of timing investments and predicting market movements to maximize gains, particularly in the middle of a major geopolitical event.
“It is a fool’s errand,” said Mark Lotocky, an advice-only financial planner and owner of the Dixon Davis Group in Victoria. Rather than trying to predict the bottom of the market in a war, he said, “if you have the cash, invest. Don’t hold on to it ... There are no statistics that say it’s better to hold on for a month to see if the market’s going to go down again.”
Why oil prices have markets on edge
Markets could well have further to fall. In a note to clients this week, John Canavan, lead U.S. analyst at Oxford Economics, said that high energy prices, uncertainty around the Iran war and risks around private credit markets “should keep stocks under modest pressure over the near term.”
Meanwhile, a survey of investment managers by S&P Global this month found U.S. risk appetite at its lowest level since September, 2025. The March Investment Manager Index survey also showed a sharp increase in expectations of net equity losses over the next 30 days.
Most investors, however, are likely to benefit from investing consistently according to a predetermined plan. That is true regardless of market moves, said Dan Bortolotti, a portfolio manager with the Bender, Bender and Bortolotti team at PWL Capital in Toronto.
“Volatility like this will crop up from time to time ... and it’s really important to get away from the mindset that we have to rethink the whole plan just because we’ve had a few volatile days,” he said.
Large rises or falls in the values of different assets could be an opportunity for investors to look at their portfolios and rebalance in line with their target asset allocation of equities, bonds and other asset classes.
Mr. Lotocky suggests keeping tinkering to a minimum, and highlighted research showing no statistical advantage to rebalancing more than once a year. How often a person invests also influences how often they will need to rebalance. Someone setting aside part of their paycheque for regular investments is effectively rebalancing on the go, and can then rebalance on an annual basis if needed, he said.
Another effective strategy can be waiting to rebalance until asset weights move beyond predetermined thresholds.
Down but not out: Emerging markets could endure Middle East shocks, investors say
“For our clients, typically it’s a five-percentage-point threshold. So if you had a 60 per cent stock target, you’d want to be down to 55 per cent before you started buying in,” said Mr. Bortolotti.
A “reasonable” threshold, Mr. Bortolotti said, can help investors avoid the trap of trading too much if their portfolios deviate from a target allocation. While sticking to a rule is important, he said, investors shouldn’t worry about fine-tuning a threshold or missing opportunities by not rebalancing at exactly the right time.
“There’s no perfect rule,” he said. “There’s reasonable and unreasonable, but there’s definitely no optimal.”
For some, market moves may even remove the need for manual adjustments. Investors who have not been studiously rebalancing may have seen their portfolios become increasingly weighted toward equities over the past few years, on the back of strong stock market performance. A share market slump could do the work of rebalancing for these investors, said Mr. Bortolotti.
At the same time, investors should be aware that rebalancing equities down to a target allocation may weigh on a portfolio’s performance in the event of a stock market rally. Advisers say that’s the point: Rebalancing is primarily about risk management, not enhancing returns.
For most investors, the trade-off of consistently following an investment plan is still likely to offer more benefits than chasing maximum returns.
“Just set it and forget it ... and then enjoy your life. I mean, that seems like a better thing to do,” said Mr. Lotocky.