Uncertainty Is Not the Enemy of the Investor

Uncertainty is once again dominating financial headlines. News of cooling economic growth, rising unemployment, and a central bank seeking the right balance between inflation and growth is pouring in rapidly. For many investors, this feels unsettling. Yet it’s important not to equate uncertainty with danger.

Financial markets rarely move in straight lines. Periods of calm and predictability are almost always followed by phases of doubt and volatility. These are often the moments that separate short-term reactions from long-term investment strategies. Those who only invest when everything feels clear and comfortable risk consistently being too late.

One notable change from previous years is the role of cash. For a long time, holding cash yielded virtually nothing. That picture has changed. Today, cash earns interest again and offers flexibility. Liquidity no longer automatically comes at the expense of returns—it creates room to stay patient and seize opportunities when markets correct.

Also, the idea that lower interest rates automatically boost equity markets needs some nuance. When central banks cut rates due to slowing economic growth or weakening labor markets, markets often react unpredictably. Lower rates may provide support, but they don’t remove uncertainty around profits and growth. In such periods, selectivity becomes more crucial than ever, and strong companies stand out more clearly from weaker ones.

Volatility is often viewed negatively, but in reality, it forms the foundation for investment opportunities. Without price swings, there’s little room between value and market price. When sentiment worsens and opinions diverge, situations often arise where assets are temporarily valued below what their underlying quality deserves.

For value and contrarian investors, these are familiar conditions. When confidence is widespread and everyone is looking in the same direction, opportunities are usually scarce. When doubt grows and collective sentiment turns cautious, the chance to build long-term value with discipline increases.

Uncertainty rarely disappears when investments become attractive. Often, the opposite is true. That doesn’t make these periods comfortable, but it does make them important for those with a long-term outlook.

This is the final article of the year. The column series will resume in January with continued focus on markets, the economy, and the opportunities that arise when noise and reality begin to diverge.

Disclaimer

The information provided in this communication is for informational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. The views expressed are those of Lunar Asset Management N.V. as of the date of publication and are subject to change without notice. Past performance is not indicative of future results. Investors should seek professional advice tailored to their specific financial situation and risk profile.