What are the markets doing today? More to the point, how much does it matter?

Watch any business bulletin or financial channel. It’s likely there’ll be a ticker running along the bottom of the screen, with up-to-the-minute coverage of just how much markets are winning or losing. There might appear to be useful updates, but so often, the constant changing and bombardment of the 24-hour news cycle means people get distracted by market ‘noise’ and ignore the long term.

Shutting out the noise

There’s been a lot of talk since the start of the year about market unrest. Earlier in January, it looked like markets were getting cold feet about a number of things, including a new Trump presidency and increased UK government borrowing.

Then, later in the month, global markets took a big slump. The arrival of Chinese AI chatbot DeepSeek has been taken as a threat to firms that have made big gains from the artificial intelligence boom. US chip manufacturer Nvidia (which was the world’s most valuable company) lost more than US$600 billion from its market value in a single day.

Concerns about volatility are largely a question of perspective. Look at the S&P 500, one of the world’s largest financial indices over the last six months. As the chart here shows, while none of the losses or gains in a single day are as much as we’ve seen in the past, it still looks a bit of a bumpy ride.

But take a step back. For the sake of argument, if you could invest directly in the index. Starting with $1,000 last August, by the end of January you’d be up around $100. The most you’d have lost over that period would be $61 dollars (but remember, past performance is not an indicator of future returns.)

Chart shows daily percentage change of the S&P 500 Index between 31 July 2024 and 28 January 2025, and theoretical returns if an investor were able to invest US$1,000 in the index the beginning of that period. ***Past performance is not a guarantee of future returns***.

Markets aren’t machines

These periods of volatility are a reminder that markets are amorphous. We can be so sure that they’re one thing, but then they change and become something else entirely. Types of company, regions, or particular themes go in and out of fashion.

Financial markets are not machines or logical. They are a collection (albeit a very large one) of human opinions.

This means that every time you hear a financial expert telling you what the market “thinks” about a particular subject, for example, what the market expects from a government’s budget, an election result, or a particular stock, this is merely a reflection of how this hive mind of investors is pricing in what they think will happen.

People, even large groups of people, get tired, or hungry, or distracted around Christmas or over the summer. In short, while the hive mind can do incredible things, it can also get things wrong, or change its mind, seemingly at random.

Focus on what you know you know

Back in 2002, then US defence secretary Donald Rumsfeld made his now infamous comment about “knowns and unknowns”. There are known knowns (the things we know will happen) and known unknowns (what we know can happen and so can prepare for).

Then there are unknown unknowns. These are the risks we can’t predict or prepare for. This last category is a tricky one for investors. But the truth is, there’s no point trying to work these out. Even the best economists in the world can’t. We just need to accept they exist.

So instead of being too hung up on what the markets are doing on a particular day, when they might go off at a complete tangent, it’s better to focus on what we can control.

So, what are the known knowns?

In the longer term, there are big milestones like retirement, making your final mortgage payment, children going to university. These are fixed points we know will happen, but with several years to plan for them.

There are also several ‘knowns’ in the short term, particularly as we get closer to the new tax year. With regular financial planning we can help mitigate them.

For example:

· Employer National Insurance contributions going up is a big concern for business owners. These rise to 15% from 6 April and the wage threshold for when payment stats has also dropped substantially from £9,100 to £5,000.

· As of January, private school fees are now liable for VAT, meaning the likelihood of a bill hike if your children are at a fee-paying school. The government also plans to remove business rates relief from April this year.

· From the end of March, extra stamp duty relief for first-time buyers and movers in England and Northern Ireland will stop. The stamp duty threshold for first-time buyers returns to its previous rate of £300,000.

Also on the horizon are factors that could affect the regular cash flow. Things like council tax bills and rail travel. Other announcements from October’s budget won’t come in for a few years, notably inheritance tax being applied to unused pension assets.

These fall into the known unknowns category. They are risks that can happen, but they’re known quantities. We can be prepared.

Whether known or unknown, the best solution is sticking to a plan. Then ensuring that the plan is reviewed regularly to make sure it’s up to date.

That way, when something surprising does come along, we can look again to see what adaptation we need to make – leaving you able to keep that big picture in full view.

We have a new office, at 13 Arthur St Oswestry, we’d be delighted to see you there in person for your next review.