Filtering the Market Noise

Everyone wants to know where the markets are going. Social media is filled with people predicting the future. It’s almost a perfect match — investors want certainty and someone out there is always willing to sell predictions.

The problem is that markets rarely play out the way people expect.

Humans naturally look for certainty in an uncertain system. We want to feel in control, but the reality is that investing doesn’t work that way. Very little is certain outside of a few broad concepts, such as inflation and long-term economic growth. Over long periods of time, markets generally move higher because economies continue to expand, businesses continue to innovate, and money continues to lose purchasing power.

Recently, someone asked me what I thought the markets would do next. Would the S&P 500 go up? Would the TSX outperform?

When I get questions like that, I usually don’t answer right away. My first question is always why?

What are you trying to accomplish with that information? What action are you actually considering taking?

Most of the answers usually fall into a few categories. These examples mainly apply to investors in the accumulation phase. If you are already in decumulation, your retirement plan should already account for unpredictable markets.

Emotionally, this is about protection. People want to preserve what they have.

The problem is that moving into cash is usually a form of market timing, and market timing has been proven repeatedly to be extremely difficult. Plenty of studies have shown that investors who move into cash often miss the recovery.

Case in point: the Iran conflict still isn’t resolved, yet markets already bounced back. Markets move ahead of certainty. They always have.

Many investors move to cash hoping to avoid losses, but some of the market's strongest recovery days often occur shortly after major declines. Missing those rebounds can have a significant impact on long-term wealth.

This is simply the opposite side of the same problem.

Holding cash long term creates two issues:

Again, this is another well-documented suboptimal investing behavior. Investors wait for the “right time,” but the market rarely gives obvious entry points.

This is another version of market timing, except now the focus shifts toward sectors or industries.

In reality, investors usually aren’t talking about sectors broadly. They are talking about themes like Canadian banks, energy stocks, AI, or tech.

The issue is that these rotations are often short-lived and difficult to predict consistently. Markets move quickly and reversals happen fast. What usually starts as “portfolio positioning” slowly turns into trying to maximize profits through timing.

That’s a fair concern, but there is a difference between losing value and losing money.

At one point this year, my portfolio was down roughly $250K on paper. I didn’t actually lose anything unless I sold.

We all know markets are volatile, yet they still remain one of the best wealth-building machines available. Short-term volatility is simply part of the process.

This answer usually circles back to the same behaviors again: moving to cash, rotating sectors, or trying to avoid downturns altogether.

Since 1980, the stock market has experienced numerous corrections of 10% or more, yet it has continued to reach new all-time highs over the long term. Volatility isn't a bug in the system—it's part of the price investors pay for higher returns.

Ironically, falling markets are usually when investors should continue contributing consistently.

Yes, volatility feels uncomfortable. Yes, it’s emotionally harder to buy during declines. But accumulation years benefit from volatility far more than most investors realize.

Sometimes investors even consider stopping their DRIP because they want to “optimize” things. In most cases, the better approach is simply to let the market machine keep doing its thing over time.

This one is tougher.

With individual companies, I don’t think it matters nearly as much as people believe. Market cycles don’t suddenly change the long-term fundamentals of strong businesses.

With indexes, however, geography does matter because you are investing in economic systems.

Most investors naturally carry home-country bias, but ultimately you are betting on economic productivity and long-term growth potential.

Personally, I still believe the U.S. market will outperform Canada over the long term. The U.S. simply has stronger innovation, stronger technology leadership, and deeper capital markets.

That doesn’t mean Canada has no role. It simply means you should choose your allocation intentionally and write down why you chose it.

That matters more than reacting emotionally every six months.

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Honestly, I get lucky for the wrong reasons sometimes.

I made great money with Microsoft, but not because I predicted cloud growth perfectly. I actually underestimated it.

I stayed away from Amazon for years because I thought it had already peaked.

That experience reinforced something important for me:

Strong businesses with durable moats and consistent long-term growth matter far more than predictions.

That’s also why index ETFs play such an important role in my portfolio. Markets are incredibly efficient systems over time, even if they look chaotic in the short term.

Despite having research teams, advanced tools, and full-time market coverage, many active managers underperform their benchmark over long periods. If professionals struggle to predict markets consistently, individual investors should be cautious about believing market forecasts.

On a lighter note, if I had to make broad observations, I think the U.S. economy could slow somewhat over time, mostly due to tariffs, geopolitical shifts, and countries trying to reduce dependence on globalization.

But these transitions happen slowly. Manufacturing shifts take years. Infrastructure changes take years. Politics also tends to prioritize short-term cycles rather than long-term infrastructure investment.

Canada could benefit somewhat because of natural resources and global demand for energy and commodities. The Canadian dollar has historically been tied closely to oil prices — hence the term “petro-dollar” — although that relationship hasn’t felt particularly strong lately.

As for Canadian banks, while I’m not especially bullish on the Canadian financial sector overall, the oligopoly structure isn’t disappearing anytime soon.

Not exactly bold predictions, I know.

The reality is that most market predictions are simply narratives attached to uncertainty.

Some people will get lucky. Some predictions will accidentally be correct. But consistently predicting markets, sectors, or economic shifts is far harder than social media makes it look.

That’s why I focus more on process than prediction.

I want strong businesses, broad diversification, consistent contributions, and enough patience to let compounding do its work.

The irony of investing is that the more noise you filter out, the better your decisions usually become.

A little more knowledge can add to your life journey.

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