Watching the news lately, you’d be forgiven for feeling like the ground beneath the economy is shifting. Interest rates are heading back up. Conflict in the Middle East pushing oil prices higher. AI reshaping entire industries. Markets swinging on headlines.
It’s the kind of environment that makes you want to do something. Move your super into cash. Pull back on investments. Rethink the plan you put in place twelve months ago.
But here’s the thing most people don’t hear often enough: in moments like these, the smartest move is usually the one that feels the least dramatic.
Volatility is normal – your reaction to it is what matters
Markets move, they always have. The Australian share market has delivered positive returns in roughly seven out of every ten calendar years over the past century. But to capture those returns, you have to stay invested through the years that don’t feel good.
That’s harder than it sounds. When headlines are alarming and your portfolio dips, the urge to act is real. It feels responsible and proactive. But study after study shows that investors who try to time the market, selling when things look bad and buying back in when they feel safe, consistently underperform those who simply stay the course.
The reason is straightforward. Markets don’t send you a notification when they’re about to recover. Some of the strongest trading days in history have come within weeks of the worst. Miss just a handful of those days and the impact on your long-term returns can be significant.
What’s actually happening right now
Today, the Reserve Bank raised the cash rate by 0.25% to 4.10%. It’s the second hike this year, following three cuts during 2025 that ultimately failed to bring inflation sustainably lower.
It’s worth noting this was not a unanimous decision. Five Board members voted to raise, four voted to hold. That split reflects genuine uncertainty about the outlook, and the RBA itself has acknowledged there are “material uncertainties” about where the economy goes from here.
The case for raising rates came down to a few key factors. Inflation picked up materially in the second half of 2025, driven by stronger-than-expected demand, particularly in business investment. The conflict in the Middle East has pushed fuel prices sharply higher, with petrol surging from around $1.71 in February to above $2.20 now, adding further upward pressure. Short-term inflation expectations have risen, which the RBA views as a risk to its credibility. And the labour market has tightened slightly, with unemployment a little lower than expected.
The RBA’s view is that inflation is likely to remain above target for longer than previously anticipated, and the risks are tilted to the upside. At the same time, the Board noted that the effects of last year’s rate cuts have not yet fully flowed through to the economy, and financial conditions have only tightened modestly so far this year. The path from here will depend heavily on how inflation data and the global situation evolve.
Globally, the US economy continues to grow on the back of massive AI investment, while Europe remains sluggish and China is working through a prolonged property downturn. Military action in the Middle East has disrupted oil supply routes and pushed crude prices higher, adding another layer of uncertainty.
None of this is comfortable. But none of it is unprecedented either. Interest rate cycles, geopolitical disruption and sector rotation are features of investing, not bugs. The question isn’t whether these things happen. It’s whether your financial plan is built to withstand them.
The real risk isn’t market movement – it’s emotional decisions
When markets feel uncertain, the temptation is to make changes. Reduce your exposure to shares. Move to cash. Wait for things to settle.
The problem is that “settling” rarely looks the way you expect. There’s almost never a clear, calm signal that it’s safe to invest again. What tends to happen instead is that markets recover gradually, and by the time you feel confident enough to re-enter, you’ve already missed a meaningful portion of the rebound.
Cash feels safe, and right now it’s earning genuine returns with the cash rate at 4.10%. But over long periods, cash consistently underperforms growth assets like shares and property. It has a role in your portfolio, absolutely, but it shouldn’t become the default just because you’re feeling uneasy.
The bigger risk is letting short-term discomfort override a long-term plan that was built with moments exactly like this one in mind.
What a good plan looks like in uncertain times
A well-constructed financial plan isn’t one that assumes everything will go smoothly. It’s one that accounts for the fact that it won’t.
That means your investments should already be diversified across asset types, geographies and sectors, so that no single event can derail your progress. It means you should have enough accessible cash to cover your short-term needs without being forced to sell investments at a bad time. And it means your assumptions about interest rates, returns and cash flow should reflect the world as it is now, not as it was three years ago.
If your plan was built properly, it has already anticipated environments like this one. The work isn’t to change the plan. It’s to make sure the plan still reflects your circumstances and goals.
When it does make sense to act
Staying the course doesn’t mean ignoring your finances. There are moments when a review is genuinely valuable.
If your income has changed, your family situation has shifted, or you’re approaching a major milestone like retirement, it’s worth checking that your plan still fits. If you came off a fixed-rate mortgage in the past year, stress-testing your budget against a cash rate of 4.75% is sensible. If your investment portfolio has drifted significantly from its original allocation because one asset class has outperformed others, rebalancing may be appropriate.
The distinction is between reactive decisions driven by fear and deliberate adjustments driven by a change in your actual circumstances. One tends to cost you, whereas the other keeps you on track.
The value of having someone in your corner
One of the most underappreciated roles a financial adviser plays is helping you do less, not more, during periods of volatility. It’s not about making dramatic calls. It’s about giving you the confidence that your plan is sound, your assumptions are current, and you don’t need to react to every headline.
That perspective is hard to give yourself. When it’s your money and your future on the line, objectivity is difficult. A good adviser acts as a circuit breaker between your emotions and your decisions, not to dismiss how you’re feeling, but to make sure those feelings don’t lead to choices you’ll regret.
The bottom line
Markets will always give you reasons to worry. Rate movements, geopolitical events, economic slowdowns. These are part of the landscape, not a signal to abandon your strategy.
The people who build lasting wealth aren’t the ones who react fastest. They’re the ones who stay steady, keep perspective, and make decisions based on their goals rather than the latest headline.
If you’re feeling uncertain about where you stand, that’s a good reason to talk to someone, not to start making changes on your own. If you’d like to talk through how current conditions affect your situation, book a complimentary strategy session with one of our financial advisers.
Frequently asked questions
Should I move my investments to cash when markets are volatile?
While cash feels safer during periods of uncertainty, moving to cash locks in any losses and means you risk missing the recovery. Historically, some of the best days in the share market have come shortly after the worst. A diversified portfolio is designed to weather volatility, and staying invested has consistently outperformed trying to time the market over long periods.
How do I know if my financial plan is still on track?
A good plan is reviewed regularly, not just when markets move. If your income, family situation, or goals have changed, it’s worth a check-in. If nothing major has shifted, your plan was likely built with environments like this in mind. A financial adviser can help you stress-test your plan against current conditions and give you confidence that you’re on track.
What does “staying the course” actually mean in practice?
It means continuing to follow the investment strategy you set based on your long-term goals, rather than reacting to short-term market movements. It doesn’t mean ignoring your finances. It means distinguishing between genuine changes in your circumstances that warrant a review, and market noise that doesn’t.
Is now a good time to invest, or should I wait for markets to settle?
There’s rarely a perfect time to invest. Waiting for certainty usually means missing returns, because markets tend to recover before confidence does. If you have a long-term horizon and a diversified approach, the best time to invest is when your financial plan says it makes sense, not when the headlines feel calm.
How can a financial adviser help during uncertain times?
A financial adviser helps you stay objective when emotions are running high. They can review whether your plan is still fit for purpose, stress-test your assumptions, and give you the confidence to make decisions based on your goals rather than market anxiety. At Financial Spectrum, our advice is fee-for-service with no commissions, so our guidance is always aligned with your interests.
What’s the difference between rebalancing and panic selling?
Rebalancing is a deliberate adjustment to bring your portfolio back to its intended allocation after market movements have shifted the balance. It’s a planned, strategic action. Panic selling is a reactive decision driven by fear, usually locking in losses and missing the recovery. One is part of a disciplined approach. The other tends to erode wealth over time.
Rebecca is passionate about promoting the positive impact of quality financial advice on personal wellbeing. Read her full bio here.
