May 2025 Newsletter
- bespoke62
- 5 days ago
- 6 min read
Updated: 3 days ago
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Source: FE Analytics, Humans Under Management. Returns are based on the total return of the respective indices, which assures all dividends are reinvested. Returns are in local currencies.
Logic Lost to Fear
Have you ever noticed how differently you think about your investments during calm markets versus turbulent ones? In the world of investing, there’s a constant battle between logic and emotion. Most of the time, logic prevails, but during market declines, fear can take the driver’s seat, potentially sabotaging our financial futures.
The recent uncertainty surrounding President Trump’s tariff introductions is just the latest instance where market logic appears to have been overshadowed by fear. While this is simply the current “crisis of the day,” it reminds us how easily headlines and short-term concerns can disrupt our rational investment thinking.
The Logical Foundation of Investing
When we strip away the complexity, investing in global equities means becoming part-owners of real businesses. These are the companies we interact with daily, making products we buy and providing services we rely on.
As owners, we’re entitled to future dividends and potential share price increases as these businesses grow. This ownership model is grounded in logic and business fundamentals
The value of our investments is based on company earnings and profitability. When a company grows its market share, its future earnings typically increase, and the share price should rise. Additionally, quality businesses can combat inflation by passing price increases on to consumers, maintaining profit margins. This is why global equities have historically been among the best hedges against inflation.
When Story and Fear Triumph Over Logic
While the logical foundation of investing is solid, our decisions are also impacted by the stories we tell ourselves about companies and markets. During periods of positive sentiment, which thankfully occur more frequently, we tell ourselves that companies will flourish and tomorrow will be brighter than today. This optimistic narrative aligns with what we observe: humans innovating, companies developing new products, and markets becoming more sophisticated.
However, we occasionally experience periods of negative sentiment when, contrary to the evidence, people collectively behave as if the future will be worse than today. Headlines turn gloomy, and a cloud of pessimism hangs over the market.
Psychologist Jonathan Haidt explains this dynamic through the metaphor of an elephant and its rider. The rider represents our logical mind (analytical and planning) while the elephant represents our emotional self (powerful and instinctive). While the rider appears to be in control, the rider usually loses when the elephant decides to move in a different direction.
In investing, our rider understands the logic of staying invested during downturns. But when markets fall, our elephant is overcome with fear and wants to flee to safety.
Many investors surrender to emotion and make decisions that are reactions to short-term events. They sell when prices are low, locking in losses and missing the eventual recovery. However, successful investors understand this dynamic and develop the emotional fortitude to keep their elephant calm when it matters most.
Standing Firm in Turbulent Times
What’s most important to remember is that fear almost always dissipates in the end. No matter how intense market anxiety becomes, it has never proven permanent. The clouds of pessimism eventually clear, giving way once again to the sunshine of optimism.
In our years of advising clients, we’ve witnessed this pattern repeatedly. For example, during the 2020 pandemic crisis, we spoke with many investors who were ready to sell everything when markets plummeted in March, convinced that the global economy was facing unprecedented disaster. By reviewing their long-term plans and calming their “elephants,” those who stayed invested saw their portfolios recover and significantly advance beyond prepandemic levels. The clients who remained disciplined are now in a much stronger financial position than they would have been had they acted on their fears.
In the words of Warren Buffett, “Be fearful when others are greedy, and greedy when others are fearful.” This contrarian wisdom reminds us that the best investment opportunities often emerge when fear is at its peak.
If you’re anxious about current market conditions, please don’t hesitate to reach out. Sometimes, having a calm conversation about your specific situation is all that’s needed to keep your investment elephant on the right path.
By maintaining discipline and focusing on the logical foundations of investing, you’ll be well-positioned to achieve financial independence. After all, those who weather the temporary storms of fear are the ones who reach the shores of financial success.
Visuals
All the Things People Use AI for in 2025
Thought leaders dubbed ChatGPT’s emergence - and subsequent generative AI proliferation - as the “fourth industrial age.” Whether it will reshape the economy entirely still remains to be seen. But there’s no denying that most people are familiar with, and are actively using AI.
Population vs. GDP by Global Region
In an increasingly tumultuous global economic landscape - where trade wars roil markets, industries, and jobs - where exactly does economic power lie? And how much is it relative to a region’s population? This graphic compares five major world regions by their share of global population vs. GDP.
Top Countries by Stock Market Ownership
The rise of no-fee investment platforms have pushed people into the stock market, particularly those under the age of 35. But some countries have a mature investment landscape, with a higher share of the population already holding invested assets.
We rank the stock ownership rate for 32 countries using data from HelloSafe, a financial services comparison website. They used the latest available figures available at the World Bank from 2023 - 2024. This data includes direct shareholding as well as exposure via life insurance and pension funds. More than half of the American population (55%) is invested in the stock market, the highest for any country in this dataset.
We hope that you enjoyed this month’s newsletter. Please let us know what you enjoyed, or write back with any of your own news.
As always, we’re here for you. See you next month. |
Created By Humans Under Management On Behalf Of Bespoke Financial Services |
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