Investing in a Rumor Mill

Doug Walters, CFA

A recent relief rally tied to developments in the Strait of Hormuz highlights a familiar truth: markets don’t always wait for facts. This piece examines the risks of headline-driven investing and reinforces why disciplined, diversified portfolios remain the foundation for long-term success.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

Markets don’t always wait for facts. Sometimes, they don’t even need them. Over the past week, we’ve seen a relief rally built on little more than improving sentiment around potential developments in the Strait of Hormuz. Reports of progress, hints of negotiations, and even vague optimism have been enough to move prices meaningfully higher. Whether those developments ultimately materialize is, at least for now, beside the point.

This is How Markets Work

As many have found out at the gas pump, the Strait of Hormuz is one of the most critical chokepoints in the global economy, responsible for the flow of roughly one-fifth of the world’s oil supply. That reality makes it highly sensitive to any perceived shift in geopolitical risk. When tensions escalate, markets quickly price in the risk of supply disruption. When those tensions appear to ease, even marginally, that risk premium can unwind just as quickly.

The Key Word There is “Appear”

Recent price action reflects exactly that dynamic. Oil prices, equities, and other risk assets are reacting not just to confirmed events, but to expectations, probabilities, and headlines. At times, even rumors have been enough to spark meaningful moves, as markets search for signals about what comes next.

This Creates a Challenge for Investors

The outcome here is not something anyone can forecast with confidence. The path forward depends on decisions being made by a small number of policymakers, often behind closed doors, and subject to rapid change. Progress toward a deal can lift markets one day, while a setback or breakdown can reverse those gains just as quickly. In short, this is not a problem that can be solved with better prediction… it is unpredictable.

If outcomes are uncertain and largely outside of our control, how should we as investors respond? Our view is that the answer lies in preparation, not prediction.

Preparing for the Unknown

Rather than trying to anticipate the next headline, we focus on trying to build portfolios that are resilient across a range of possible outcomes. That includes diversification across asset classes, regions, and risk factors. It includes owning assets that have demonstrated an ability to endure through different economic and market environments. And it includes maintaining a disciplined rebalancing process that does not rely on getting short-term calls exactly right. Getting the narrative right is less important than being positioned to withstand whatever path ultimately unfolds.

What do we mean by “withstand?” It goes back to that phrase we discussed a few months back… where we talked about avoiding “permanent loss of capital.” When the market pulls back, which it inevitably does, do your investments participate in the eventual rebound, or do they crumble under the pressure? Volatility does not create weakness in a portfolio. It reveals it.

Times Like These

At moments like this, the headlines may feel unpredictable. They are. In fact, they always are… and that is okay. Predictability comes from discipline, diversification, and a long-term perspective designed to weather short-term uncertainty. At Strategic, we term it evidence-based investing; consistent and straightforward.

Only when the tide goes out do you discover who’s been swimming naked.
Warren Buffett

One thing to watch

The PCE Deflator (the Fed’s preferred inflation measure) is released on Thursday 5/28. Consensus is for 3.9%.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on total client assets of over $2.9 billion* (as of 4.19.26).

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