Benefitting When the Markets Throw a Tantrum
Peter McGahan
Monday 7th July, 2025.
WE don’t rip up our driving licence every time we hit a pothole. Some investors can react like this the moment markets get bumpy. They panic, bail out, and swear never to invest again, until the next boom, of course.
Market wobbles aren’t unusual. They're normal and essential. I chatted this through with our Investment Director, Martyn Page, last week when discussing the market reactions to the Middle East.
He reminded me of Peter Lynch, one of the most successful fund managers of all time, who spent 13 years at the helm of Fidelity’s Magellan Fund. He turned it into one of the best-performing funds in history. He did so not by timing the market, but by understanding it and staying calm when others were running for the exits.
From 1900 to the time of Lynch's talk, there were 50 declines of 10 per cent or more in the US market. That’s roughly one every two years. And 15 of those have been serious drops of 25 per cent or more. Full-fat bear markets. That’s one every six years, almost like clockwork.
So, if you’re in this for the long haul, expect it: markets will fall, they’ll rattle your nerves, and they’ll test your conviction.
And yet, the market has continued its long upward march, doubling roughly every nine years. Why? Because underneath all the short-term noise is something very real: companies. Not just tickers or charts or useless tv pundits - actual businesses selling things, serving customers, and generating profits.
As Lynch often said, “there’s a company behind every stock.” If the company is doing well, the share price will eventually reflect that. It really is that simple.
When the headlines turn apocalyptic?
This is where knowing what you own becomes crucial. Lynch observed that most people couldn’t explain why they owned a stock/fund. And that’s a problem. If you don’t know the reason you’re invested, you won’t have the confidence to stay invested when the price drops.
He gives the example of Taco Bell - a company with no debt, never closed a restaurant, yet its shares once fell from $14 to $1. Lynch held on, and it later shot up when PepsiCo bought it for…. $42. That kind of gain doesn’t happen if you bail out at the first sign of trouble.
Knowing the business, its debt, its earnings, its customers, is what allows you to sleep at night. Not fancy charts or TV predictions.
Another key Lynch lesson? Ignore the economic forecasts.
Even the head of the Federal Reserve, Alan Greenspan, admitted he couldn’t predict interest rates more than six months out. Yet investors obsess over what might happen with inflation, GDP, or central bank policy. It’s not only exhausting, it’s mostly pointless.
Lynch put it bluntly: “If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.”
Instead, focus on facts. If you own a hotel chain, look at occupancy rates. If it’s a car company, track used car prices. That’s real, usable data, not guesswork about what the economy might do in three years.
If you invest £1,000 in a company, the most you can lose is £1,000. But the upside? If that business thrives, you could make £5,000, £10,000, even more. You don’t have to be right every time. Being right one out of four times, with patience and persistence, can make all the difference.
The real secret is time.
Lynch gives the example of Walmart. You could’ve waited 10 years after it went public, after seeing it grow steadily, and still made 30 times your money. Microsoft? You could’ve bought three years after the IPO and still turned £1,000 into £10,000.
The best returns often come in years five, six, or seven of holding a good stock, not day five. But too many investors treat stocks like scratchcards. Buy today, double tomorrow. When that doesn’t happen, they panic.
And that’s where the stomach comes in.
Lynch says the key organ for investing isn’t the brain, it’s the gut. You need the nerve to stay put when markets fall. Because fall they will. There’s always
something to worry about: war, inflation, debt crises, elections. And yet, time and again, markets recover.
The lesson?
Don’t let fear make decisions your plan should be making. Understand your investments. Accept the bumps. And remember, investing is a marathon, not a sprint.
When the next wobble comes - and it will - do yourself a favour: make a cup of tea, review your goals and reasons, and trust your preparation. Panic is expensive. Patience isn’t.
If you would like some help with your investments, please call 01872 222422 or email info@wwfp.net or visit us on www.wwfp.net
Peter McGahan is the Chief Executive Officer of independent financial advisers Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
